Oil Down After Best Week Since June



Oil Down After Best Week Since June
Oil declined in Asia following its biggest weekly gain since June as a stubbornly persistent coronavirus and a lack of clarity over the global energy demand recovery tempered investor optimism.

(Bloomberg) -- Oil declined in Asia following its biggest weekly gain since June as a stubbornly persistent coronavirus and a lack of clarity over the global energy demand recovery tempered investor optimism.

Futures in New York fell 1% to trade near $41 a barrel. The U.K. said the country is close to a “tipping point” as new cases surge, while there were predictions of at least one more virus cycle in the U.S. Libya, meanwhile, is moving closer to reopening its battered oil industry and money managers have cut their bullish bets on Brent crude to the lowest in five months.

U.S. crude futures jumped 10% last week after a show of determination by Saudi Arabia, the most influential Organization of Petroleum Exporting Countries member, to defend the market. The Saudis hinted they’re prepared for new output cuts, and lambasted OPEC+ nations that have cheated on quotas.

There’s a lack of consensus over the rate at which massive crude stockpiles built up earlier in the year will be drawn down. Vitol Group, the world’s biggest independent oil trader, said inventories would continue to fall for the rest of 2020, while its rival Trafigura Group sees the market moving back into surplus.

“I think we’ve seen the best of the oil rally and it will struggle to make any substantial gains from now,” said Jeffrey Halley, a senior market analyst for Asia Pacific at Oanda Corp. “More lockdowns in Europe and the return of some Libyan production is weighing on sentiment.”

Prices

  • West Texas Intermediate for October delivery fell 1% to $40.69 a barrel on the New York Mercantile Exchange as of 7:22 a.m. in London.
  • Brent for November settlement dropped 1% to $42.72 on the ICE Futures Europe exchange after climbing 8.3% last week, the most since June.
  • Crude futures added 0.3% to 278.7 yuan a barrel on the Shanghai International Energy Exchange after climbing 6.9% last week.

Brent’s three-month timespread was $1.38 a barrel in contango -- where prompt contracts are cheaper than later-dated ones -- compared with $1.80 a week ago. The change in the market structure for the global crude benchmark indicates concern about over-supply has eased somewhat.

Drilling activity in the U.S., the world’s biggest producer, has held relatively steady since early July. The number of active oil rigs fell by 1 to 179 in the week through Sept. 18, according to Baker Hughes data.

Other oil-market news

  • The fuel that powers passenger planes is normally among the most expensive oil products, but in a sign of the times the coronavirus has turned it into a blending component for shipping fuel.
  • Chad has asked Glencore Plc to suspend payments on its oil-for-cash loan this year, a move that could prove a precedent for private creditors worried about being dragged into a global debt-relief push for poor countries.
  • Beta, a slow-moving tropical storm, will bring flooding rains to Texas and Louisiana as well as raking off-shore energy fields with high winds, but may not reach hurricane strength.

© 2020 Bloomberg L.P.



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