Oil rebounded on Friday as a new COVID-19 treatment showed promising results, but rising number of coronavirus cases continued to weigh on the market.
Oil gained 2.4 percent in New York on Friday, but still fell for the week. The market followed stocks higher after Gilead Sciences Inc said its remdesivir treatment cut COVID-19 mortality risk by 62 percent.
Still, the coronavirus pandemic is far from easing around the world and the International Energy Agency (IEA) said a jump in cases could derail the market recovery.
“If there’s one positive today concerning oil and the virus, it’s the news about remdesivir,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures LLC. “Still, you can’t help but try and dig into the new virus numbers that come out each day.”
West Texas intermediate for July delivery on Friday rose 2.4 percent to US$40.55 a barrel, down 0.3 percent for the week.
The global benchmark Brent crude on Friday added 2.1 percent to 43.24 a barrel, up 1 percent weekly.
Crude has struggled to extend a recent rally as traders weigh fresh outbreaks of the virus. California, Texas and Florida have recorded some of their biggest daily gains in cases and deaths this week. There is a growing risk that a resurgence will impede efforts to reopen the US economy.
“Until the economy is wide open again, it’s hard to imagine oil consistently back up to where it was before the pandemic,” Hiley said.
“America is still in the throes of the pandemic and this spells bad news for the oil demand outlook,” said Stephen Brenock, an analyst at brokerage PVM Oil Associates. “Against this backdrop, upside potential for oil prices will remain in short supply.”
While the IEA has said that demand should rebound sharply over the next three months as economic activity resumes, it also said that a flare-up of the virus, which is raging across several US states and re-emerging in Asia, is “casting a shadow over the outlook.”
Supply could also become more abundant as Libya’s National Oil Corp announced that it would lift force majeure on all exports following months of near-zero shipments.
The Kriti Bastion tanker has started loading 730,000 barrels of crude at Es Sider, with the cargo heading to Italy, according to port operator Waha Oil Co.
Meanwhile, Iran is expanding its oil production capacity in anticipation that an eventual end of sanctions would allow it to wrest back its share of the global crude market, Iranian Minister of Oil Bijan Namdar Zanganeh said.
“It’s true that our output is low because of cruel and illegal sanctions, but things won’t stay the same,“ Zanganeh said in a speech broadcast on state television. “We need to increase our production capacity to be able to return to the market in full force and restore our share whenever necessary.”
The statements were made on the sidelines of a deal-signing ceremony for the development of Yaran, an oil deposit in the Khuzestan Province in the south of Iran. The deposit is shared with Iraq.
Iran’s crude exports took a major hit after the US withdrew from Iran’s nuclear deal and imposed crippling sanctions on the nation’s economy and energy sector.
Additional reporting by staff writer
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