Light Crude Settles Above $40
(Bloomberg) -- Oil closed at its highest level in almost four months before the U.S. holiday weekend, cheered by signs the world’s biggest economy is recovering from coronavirus-related lockdowns, even as fears linger over a resurgence.
Prices strengthened after a Labor Department report showed that payrolls rose by 4.8 million in June and the previous month was revised higher. That built on gains on Wednesday from a bigger-than-expected drop in U.S. crude stockpiles as well as plunging output from OPEC producers. But further upside may be limited as fresh outbreaks of the virus are reported across the nation, prompting some states to pause or even reverse re-opening measures.
“The higher than expected increase in non-farm payrolls is supportive on the heels of yesterday’s larger than expected crude draw,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “The surges in new Covid-19 cases may dampen expectations of things opening.”
While oil has recovered from an unprecedented market crash and is back at levels last seen in early March, the rebound in fuel consumption has been patchy at best. The scale of the challenge was highlighted in a report that U.S. gasoline demand over the Fourth of July weekend -- normally the peak of the summer driving season -- will be at least 20% lower than a year ago.
“Gasoline has carried the load on recovery and demand, and it’s not clear whether that could continue into August and September,” said Andrew Lebow, senior partner at Commodity Research Group.
- West Texas Intermediate for August delivery rose 83 cents to settle at $40.65 a barrel on the New York Mercantile Exchange.
- Brent for September settlement advanced $1.11 to end the session at $43.14 on the ICE Futures Europe exchange.
- Both benchmarks closed at highest since March 6.
Oil has also been buoyed by evidence that efforts to scale back production are working. A survey on Wednesday showed OPEC output fell to the least since 1991 in June, while Russia reached near total compliance with its OPEC+ quota.
OPEC+ hasn’t made any decision yet on whether to extend its full production cutback -- which stands at 9.6 million barrels a day -- into August, or ease it as initially planned to 7.7 million at the end of this month, Russian Energy Minister Alexander Novak said. The coalition will meet on July 15 to decide.
Other oil market news:
- Explorers extended the slump in U.S. oil rigs for a 16th straight week as the industry looks to lower costs by completing wells that have already been drilled.
- Exxon incurred an unprecedented second straight quarterly loss as almost every facet of the oil giant’s business slumped.
- The global refining industry is entering a consolidation phase as slowing oil demand growth is set to coincide with large-scale projects that will start coming online next year, according to Goldman Sachs Group Inc.
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