Oil posted a small weekly gain on tentative signs that demand is picking up even as a new wave of COVID-19 cases casts a shadow over the market.
Futures in New York edged lower on Friday, but still managed to record an advance of 0.7 percent this week on shrinking US crude stockpiles and signs of improving demand in China and India.
Gains were capped by record new COVID-19 cases from Germany to Portugal and the biggest surge in US daily infections in two months.
“We had some bright spots, but the outlook remains really challenged in terms of demand and the rising COVID cases,” Again Capital LLC partner John Kilduff said. “We keep getting these dueling inputs where we get some hopefulness about things picking up and then get knocked back down.”
Crude futures in New York have clung close to the US$40-a-barrel mark since last month amid uncertainty around a demand recovery as the novel coronavirus rages.
West Texas Intermediate (WTI) for November delivery on Friday slid 0.2 percent to settle at US$40.88 a barrel, up 0.7 percent for the week.
Brent crude for December delivery on Friday fell 0.53 percent to US$42.93 a barrel, up 0.2 percent for the week.
Meanwhile, OPEC producers and allies see a risk of an oil surplus next year if Libya’s production rises and demand remains depressed.
At the same time, the market’s structure continues to strengthen, with the spread between Brent’s nearest contracts at its narrowest since late July.
For WTI futures, the prompt spread rallied to its tightest contango in a month.
Prices pared earlier losses on Friday after US retail sales and consumer sentiment indicators topped estimates.
“We’re having a much stronger consumer than we anticipated, despite a good part of the country struggling to find work,” Oanda Corp senior market analyst Edward Moya said. “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.”
OPEC and its allies are facing pressure to postpone their plans for tapering 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 next year 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.
Additional reporting by staff writer
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