Crude oil flipped between gains and losses as concerns mount over the pace of the economic recovery from the pandemic.

New York futures traded in a US$1.10-a-barrel range on Thursday, supported by stronger equities, with the S&P 500 Index up as much as 0.8 per cent after a report that Treasury Secretary Steven Mnuchin plans to resume negotiations with House Speaker Nancy Pelosi over a fresh round of economic stimulus.

Still, a shaky outlook for demand is capping any rally. The International Energy Agency’s Neil Atkinson said at a Bloomberg event that the agency is more likely to downgrade its demand forecasts than lift them in its next report. Meanwhile, a U.S. government report showed jobless claims are at about four times pre-pandemic levels.

“We are being hit by the second wave of this nasty virus and there’s a lot of ambiguity out there,” said Bart Melek, head of global commodity strategy at TD Securities. The U.S. unemployment data “is confirming the idea that the economy is not recovering as quickly as we’ve hoped.”

A few bright spots for oil consumption have failed to stoke much optimism in the market amid the pandemic-driven demand rout and worries over returning OPEC+ supply. Road fuel consumption in the U.K. is continuing to rise over the last month and Londoners have been taking to the road despite government guidance to shift to work-from-home.

The OPEC+ alliance, meanwhile, is slowly tapering its production cuts and Libya is unleashing fresh supply as its civil war abates. A possible collapse in the OPEC+ deal is the biggest downside price risk to the oil market, Standard Chartered analyst Emily Ashford said during a Bloomberg-hosted panel discussion.

“We will continue to see a pricing regime for oil in the short-term that is characteristic of this summer,” said Harry Tchilinguirian, head of commodity research at BNP Paribas SA in London. “Moving essentially sideways, but buffeted by shifts in risk sentiment, while waiting for that elusive catalyst to break out.”

Prices

  • West Texas Intermediate for November delivery fell 11 cents to US$39.82 a barrel at 12:45 p.m. in New York
  • Brent for November settlement slipped 28 cents to US$41.49 a barrel

Time spreads also signal further weakness. The spreads between the two nearest December contracts for both U.S. and global benchmark crude futures moved deeper into contango on Thursday, pointing to concerns of oversupply.

Meanwhile, profits from turning crude into diesel remain historically weak, and some refiners are looking to close or convert plants. Total SE said its Grandpuits refinery will become a “zero-crude platform” in the coming years.

Still, there are potential bright spots. Japanese refiners went on a buying spree last week, boosting the prices of some crude cargoes in the Middle East.

Other oil-market drivers

  • Oil traders are reporting a sharp increase in Iraqi export cargoes for next month, as they look for clues to the country’s ability to meet its OPEC quota.
  • China Wanda Group, the parent company of Singapore-based Hontop Energy, is close to settling the troubled oil trader’s disputes with two of its major lenders, according to people familiar with the negotiations.