Oil fell this week amid growing concerns that another wave of the COVID-19 pandemic would spark tighter lockdown measures and further stifle crude demand.
West Texas Intermediate (WTI) for October delivery on Friday dropped 0.15 percent to US$40.04 and fell 2.6 percent on the week.
Brent crude for November delivery shrank 0.05 percent to US$41.92, losing 2.85 percent for the week.
Photo: Reuters
The number of US COVID-19 cases rose above 7 million, Johns Hopkins University data showed.
Meanwhile, a second governor tested positive for the virus as cases surge around the country.
At the same time, the market is contending with returning supply. Oil traders have reported a sharp increase in Iraqi exports for next month, while output from Libya has shown signs of rising this week.
“There are concerns about the stalling economic recovery,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago.
When the world gets a vaccine, widespread reopenings and a meaningful increase in travel, “that’s when you’re going to start to see demand pick up” and prices rally, Streible said.
US crude’s gradual climb since May has come to a halt this month, with futures on track to drop about 5.5 percent for the month.
Still, Goldman Sachs Group Inc said that oil consumption is currently just above 93 million barrels a day and might rise 1.8 million a day to the end of the year.
However, any meaningful recovery in consumption has so far been held back by the lingering pandemic.
“We’re going to be range-bound for a while until there’s the perception that the bulk of the COVID impact on demand is behind us,” Strategic Energy and Economic Research president Michael Lynch said.
Additionally, “if the OPEC+ deal starts to fall apart and we get a lot more crude, that would send prices down,” Lynch said.
In a sign of just how damaging the virus has been to oil demand, the industry’s largest tankers next expect to earn 8 percent less than they were anticipating back in May, a survey of shipping analysts by Bloomberg showed.
That comes as nations including Saudi Arabia and Russia have drastically scaled back output, draining the hoard at sea and diminishing the flow of cargoes.
The spread between Nymex gasoline futures and WTI rallied more than 9 percent on Friday toward US$10 a barrel.
However, the so-called crack remains at its lowest seasonally since 2013.
At the same time, Gulf Coast gasoline climbed to a one-month high as refiners snapped up winter-grade fuel and on dwindling fall stockpiles.
“The gasoline crack spread strength is notable today, but it is hard to get too excited given the seasonal weakness that lies ahead for RBOB [reformulated blendstock for oxygenate blending],” Rabobank commodities strategist Ryan Fitzmaurice said.
At the same time, “the market needs to see the distillate crack perk up if there is to be a fundamentally sustainable crude rally,” he said.
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