Oil posted a small weekly gain on tentative signs that demand is picking up even as a new wave of coronavirus cases casts a shadow over the market.
Futures in New York edged lower, but still managed to record an advance of 0.7% this week on shrinking US crude stockpiles and signs of improving demand in China and India. Gains were capped by record new virus 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,” said John Kilduff, a partner at Again Capital LLC. “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 $40-a-barrel mark since September amid uncertainty around a demand recovery as the virus rages. Meanwhile, the Organisation of Petroleum Exporting Countries (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 West Texas Intermediate futures, the prompt spread rallied to its tightest contango in a month.
Prices pared earlier losses after American retail sales and consumer sentiment indicators topped estimates.
“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,” said Edward Moya, a senior market analyst at Oanda Corp.
The Opec+ is contending with unexpected return of Libyan oil output, which hit 500,000 barrels a day. The group forecasts that global oil supplies could rise by 200,000 barrels a day next year if Libya manages to revive supply and Covid-19 hits demand harder than expected, according to a document seen by Bloomberg.