Oil declined for a second session on Friday as rising COVID-19 cases threatened to derail demand, with tougher restrictions in major US cities on the horizon.
Futures fell 2.4 percent in New York for the day, but still posted the largest weekly gain in a month as optimism from news of a potential COVID-19 vaccine breakthrough jolted markets earlier in the week.
West Texas Intermediate crude for December delivery on Friday fell 2.4 percent to US$40.15 a barrel, up 8 percent for the week.
Brent crude for December delivery on Friday fell 1.4 percent to US$42.91 a barrel, up 8.8 percent weekly.
Despite the measure of hope for the long term, US cities from the west to east coasts have imposed stricter measures to slow surging case counts, raising concerns that the coronavirus will further crimp demand for fuel.
Gasoline futures also slumped.
“In the US, the virus spread is exponential and right now many states are probably going to be forced to deliver stricter measures and return to lockdowns,” Oanda Corp senior market analyst Edward Moya said. “That’s going to cripple economic activity and put further pressure in the short term as far as the crude demand outlook goes.”
Before concerns over lockdowns set in, futures also got support from signs that the OPEC+ alliance is inching closer to delaying a planned output increase in January.
However, downbeat demand forecasts from the International Energy Agency and OPEC have clouded hopes of a recovery.
At the same time, governors of states along the US west coast issued travel advisories, following measures recently imposed in New York and Chicago.
Meanwhile, crude supply in Libya is rising.
The country’s production rose to 1.145 million barrels a day on Friday, a spokesman for its state-run National Oil Corp said.
“The most likely pattern is we continue to have choppy trading in November,” said Jay Hatfield, chief executive officer of InfraCap in New York. “We have this push-pull for the next month of probably good-to-great news on treatments and vaccines juxtaposed with probably continued skyrocketing in cases and headlines about hospitals being filled.”
In Europe, where motorway traffic is down by almost 50 percent in some countries, demand is stuttering anew. That is affecting crude, with six supertankers of unwanted North Sea oil continuing to float in the region.
Meanwhile, vehicle miles traveled on US highways fell last week in another sign that Americans are keeping off the roads amid the pandemic.
Refining margins were left behind in the oil market rally that lifted not only headline prices this week, but also led to strong moves along the forward curve.
The combined refining margin for gasoline and diesel, which is a rough gauge for the profitability of processing a barrel of oil, slid on Friday for a third straight session to near US$8 a barrel. Refineries typically need the so-called crack to be above US$10 a barrel to turn a profit from processing crude.
Additional reporting by staff writer
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