Oil pared losses amid signs of stronger consumer sentiment in the U.S. during a time when rising coronavirus cases are challenging a demand recovery.
Futures in New York traded near little changed after earlier falling as much as 2.2 per cent on Friday. U.S. equities strengthened after gauges of American retail sales and consumer sentiment rose, injecting optimism into markets reeling from a rocky rebound due to the pandemic. Yet, record new virus cases from Germany to Portugal and the biggest surge in U.S. daily cases in two months is preventing a rally.
“We’re having a much stronger consumer than we anticipated, despite a good part of the country struggling to find work,” said Edward Moya, a senior market analyst at Oanda Corp. “Everyone is going to be still consuming a wide variety of goods going into these coming months, and that’s going to be positive for crude.”
Crude futures in New York have clung close t $40-a-barrel mark since September amid uncertainty around a demand recovery with the virus raging. British Prime Minister Boris Johnson threatened to force Manchester into lockdown, and in the U.S., Texas is deploying medical teams to new hot spots in the state. Meanwhile, OPEC producers and allies see a risk of an oil surplus next year if Libya’s production rises and demand remains depressed.
“We had some bright spots, but the outlook remains really challenged in terms of demand and the rising Covid cases,” said John Kilduff, a partner at Again Capital LLC. “We keep getting these dueling inputs where we get some hopefulness about things picking up and then get knocked back down.”
- West Texas Intermediate for November declined 12 cents to US$40.84 a barrel at 11:35 a.m. in New York
- Brent for December settlement lost 16 cents to US$43.00 a barrel
The Organization of Petroleum Exporting Countries and its allies continue to face calls to postpone their plans to taper output cuts. Given the uncertainty over the oil demand outlook, the right course of action is to wait for now, JPMorgan analysts including Natasha Kaneva wrote in a report. The move to add another 2 million barrels of day onto the market in January could be postponed by a quarter, the report said.
OPEC+ is also contending with the unexpected return of Libyan oil output, which hit 500,000 barrels a day this week. The group forecasts that global oil supplies could increase by 200,000 barrels a day next year if Libya manages to revive supply and the pandemic hits demand harder than expected, according to a document seen by Bloomberg.
Meanwhile, the U.S. shale industry continues to feel the impact of sluggish demand and low prices. Schlumberger, the world’s biggest oil services provider, expects it to take at least another year to rebuild one measure of profit to pre-pandemic levels.
Other oil market news:
- Zenith Energy U.S. LP agreed to buy oil-storage facilities in California from Plains All American Pipeline LP, including three terminals in the Los Angeles metro area and 50 miles (80 kilometers) of pipelines.
- Russian refinery maintenance is starting to ease up and will continue to do so through the rest of this year, according to a schedule for primary units from the Energy Ministry, shown in the table below.
- More oil workers were taken off North Sea rigs this week after they or their colleagues tested positive for coronavirus. Companies reported no major impact on operations.
--With assistance from Sharon Cho.