Oil slipped on Friday, paring a weekly gain, as concern of demand erosion from a COVID-19 resurgence countered strong US economic data.
Futures fell to about US$40 a barrel in New York as the virus continues to spread unabated across large parts of the US, clouding the outlook for energy demand.
Crude prices gained 4.2 percent for the week as data showed a rebound in the US jobs market accelerated early last month and US crude stockpiles shrank by the most this year.
Photo: Reuters
A survey showed that OPEC oil production dropped last month to the lowest since 1991.
The worsening pandemic might not have been fully captured in the jobs data, which provided a snapshot of hiring in the middle of the month before many states reversed course on their re-openings.
“We have had a sharp recovery in demand for energy products that has occurred from March to end of May,” said Daniel Ghali, a TD Securities commodity strategist. “Since then the pace of recovery has slowed. There is concern that this stall may be a signal of weakness in demand that’s tied to the rise in coronavirus cases in the US.”
Adding to the murky demand outlook, Chinese oil inventories swelled to a record this week, satellite data showed, after the world’s biggest oil importer went on a buying spree last quarter as the economy rebounded. The stockpiles might indicate a slowdown in buying by the East Asian country.
That outlook was balanced by the OPEC+ alliance’s commitment to reducing output, with Russia showing near total compliance with its targets. The group has not made any decision yet on whether to extend its full cutback — which stands at 9.6 million barrels a day — into next month, Russian Minster of Energy Alexander Novak said.
Ministers from the coalition next meet on July 15.
West Texas Intermediate declined 0.81 percent to US$40.32 a barrel, while Brent crude dipped 0.79 percent to US$42.80 a barrel.
Trading volumes were low as the US took a day off ahead of the July 4 holiday.
The global benchmark crude’s three-month timespread remained in contango — where prompt contracts are cheaper than later-dated ones — but the spread has narrowed in the past few days, indicating that concerns about oversupply have eased slightly.
The decline in US oil production continued as working rigs fell for a 16th week to the least since 2009, Baker Hughes data released on Thursday showed.
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