Oil Slides Further With Virus Resurgence Weighing on Demand - BLOOMBERG
BY Elizabeth Low and Grant Smith
- Some U.S. states, including Texas, are reversing re-openings
- WTI crude futures fall 0.9% after declining by 3.2% last week
Oil fell further after last week’s slide on fears that the resurgence of the coronavirus around the world will derail a fragile recovery in fuel demand.
Futures fell toward $38 a barrel in New York after losing 3.2% last week. Deaths from the pandemic topped half a million globally, cases rose past 10 million and a United Nations agency reported the most infections for a single day. A surge in infections across the southern and western U.S. is causing states including Texas to reinstate measures to halt its spread.
After rebounding rapidly from its plunge below zero in April on supply cuts and recovering demand, crude has fallen in two of the last three weeks. Stockpiles in the U.S. are at record highs, worldwide consumption is still a long way off pre-virus levels and many refiners are struggling with low margins. Oil for recent delivery is trading at a discount to those further out in a market structure known as contango that indicates supplies are plentiful.
“The specter of Covid is haunting the market once again, raising concern that a slowdown in the reopening of the U.S. economy will affect the recovery in demand for transport fuels,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.
Prices would likely be falling further if it wasn’t for efforts by the OPEC+ alliance to restrict production. Iraq -- a habitual laggard in the group’s supply cuts -- is reassessing contracts to pump crude at fields where costs are high as it tries to contain expenses while curbing production, in a sign of the commitment to ease a global glut.
Separately, China’s state-owned refining giants are in discussions to form a joint purchasing group to buy crude, a move that has the potential to alter the balance of power between sellers and buyers in the oil market. That could increase the Asian giant’s bargaining power and avoiding bidding wars.
|OTHER OIL-MARKET NEWS|
— With assistance by James Thornhill