(Bloomberg) – Oil posted a small weekly gain on tentative signs of a recovery in demand even as a new wave of coronavirus cases casts a shadow over the market.
New York futures fell slightly on Friday, but still managed to post a 0.7% lead this week amid reduced U.S. crude inventories and signs of improving demand in China and India. Gains were capped by new cases of the record virus from Germany to Portugal and the largest increase in daily infections in the United States in two months.
“We’ve had some bright spots, but the outlook remains really contested in terms of demand and rising Covid cases,” said John Kilduff, partner at Again Capital LLC. “We continue to get these contributions in a duel where we have a little hope for the recovery of things and then we are knocked down.”
New York crude futures have been clinging to nearly $ 40 a barrel since September amid uncertainty around a pickup in demand as the virus rages on. Meanwhile, OPEC producers and allies see a risk of an oil surplus next year if Libya’s output rises and demand remains depressed.
At the same time, the market structure continues to strengthen, with the spread between the contracts closest to Brent at its lowest since the end of July. For West Texas Intermediate futures, the rapid spread reached its tightest contango in a month.
- West Texas Intermediate for November fell 8 cents to $ 40.88 a barrel
- Brent for the December settlement fell 23 cents to $ 42.93 a barrel. The contract rose 0.2% this week.
Prices cut earlier losses on Friday after US retail sales and consumer confidence indicators beat estimates.
“We have a much stronger consumer than expected, although much of the country is struggling to find work,” said Edward Moya, senior market analyst at Oanda Corp. “Everyone is still going to consume a wide variety of incoming commodities in the coming months, and that will be positive for crude. “
The Organization of the Petroleum Exporting Countries and its allies are facing pressure to postpone their plans to phase out production. Given the uncertainty over the outlook for oil demand, the right course of action is to wait now, JPMorgan analysts, including Natasha Kaneva, wrote in a report. The decision to add an additional 2 million barrels per day to the market in January could be postponed by a quarter, according to the report.
OPEC + is also facing an unexpected return in Libyan oil production, which reached 500,000 barrels per day this week. The group predicts that global oil supplies could increase by 200,000 barrels per day next year if Libya manages to revive supply and the pandemic hits demand harder than expected, according to a document seen by Bloomberg.
Other news from the oil market:
- Zenith Energy US LP has agreed to purchase oil storage facilities in California from Plains All American Pipeline LP, including three terminals in the Los Angeles metro area and 80 kilometers of pipelines.
- Maintenance of Russian refineries is starting to slow down and will continue to do so for the rest of the year, according to a primary unit schedule from the Energy Ministry, shown in the table below.
- More oil workers have been removed from platforms in the North Sea this week after they or their colleagues tested positive for the coronavirus. The companies did not report any major impact on operations.
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