Oil slipped, paring a weekly gain, as concern of demand erosion from a coronavirus resurgence countered strong US economic data.
Futures fell to about $40 a barrel in New York as the virus continues to spread unabated across large parts of the US, clouding the outlook for energy demand. Crude prices gained 4.2% for the week as data showed a rebound in the US jobs market accelerated in early June and American crude stockpiles shrank by the most this year. A survey showed Opec oil production dropped last month to the lowest since 1991.
“We have had a sharp recovery in demand for energy products that has occurred from March to end of May,” Daniel Ghali, a TD Securities commodity strategist, said by phone. “Since then the pace of recovery has slowed. There is concern that this stall may be a signal of weakness in demand that’s tied to the rise in coronavirus cases in the US.”
Adding to the murky demand outlook, Chinese oil inventories swelled to a record this week, satellite data show, after the world’s biggest oil importer went on a buying spree last quarter as the economy rebounded. The stockpiles may indicate a slowdown in buying by the East Asian country.
That outlook was balanced by the Opec+ alliance’s commitment to reducing output, with Russia showing near total compliance with its targets. The group hasn’t made any decision yet on whether to extend its full cutback — which stands at 9.6 million barrels a day — into August, Russian Energy Minister Alexander Novak said. Ministers from the coalition next meet on July 15.
West Texas Intermediate for August delivery fell 51 cents to $40.14 a barrel on the New York Mercantile Exchange, after closing up 2.1%. Brent for September settlement declined 49 cents to $42.65 on the ICE Futures Europe exchange, paring its weekly gain to 4%. Trading volumes were low as the US took a day off ahead of the July 4 holiday.
The global benchmark crude’s three-month timespread remained in contango — where prompt contracts are cheaper than later-dated ones — but the spread has narrowed in recent days, indicating that concerns about oversupply have eased slightly.
The decline in US oil production continued as working rigs fell for a 16th week to the least since 2009, according to Baker Hughes data. Exxon Mobil Corp., meanwhile, reported an unprecedented second straight quarterly loss as almost every facet of the energy giant’s business slumped.