Oil has wavered on growing doubts over demand prospects with more potential lockdown measures on the way to combat the virus.
The market was earlier buoyed by the dollar’s biggest slide in almost four weeks, which made commodities priced in greenback more attractive, as well as a bounceback in equities. Futures in London as much as 1.2% before paring gains.
“Demand has not fully recovered and we’re at a time of the year when demand tends to weaken,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “That’s your biggest worry for the oil markets: Is the demand going to recover?”
Oil’s recovery from an unprecedented crash earlier this year waned as signs of a resurgent pandemic raise the specter of stricter lockdown measures. Crude’s revival will be long and gradual, Russian Energy Minister Alexander Novak said, estimating global demand this year will drop by as much as 10% from a year earlier. Supply concerns are also weighing on the outlook for crude prices.
JPMorgan analysts warned against adding oil to the market, as Libya production returns and the Opec+ alliance looks to its next round of tapering output cuts. The surprise return of Libyan production may add between 500,000 barrels a day to 600,000 barrels a day by the end of the year, Natasha Kaneva and other analysts wrote in the report.
“The demand recovery is slowing in energy markets, with a renewed surge in Covid cases in Europe and across the world,” TD Securities commodity strategists including Bart Melek said in a note. Ahead of further easing of output cuts under the Opec+ deal, “the market may begin looking for signals the cartel is willing to delay or otherwise alter the tapering.”