(Bloomberg) — Oil slipped as signs of stumbling recoveries in major economies from Europe to Asia threaten to delay a demand rebound.
Futures in New York fell 1.1% on Friday, narrowing a weekly gain to just under 1%. Europe’s economy unexpectedly lost momentum this month, with the region battling to control a new spike in coronavirus cases. Meanwhile, a gauge of Japan’s service sector fell and continues to signal contraction.
“The data out of Europe and Japan is disconcerting,” suggesting oil prices may have risen too high “given where we are in this phase of the recovery,” said Michael Lynch, president of Strategic Energy & Economic Research. “The implication for demand is that it’s going to be a bit lower in the next couple months.”
Meanwhile, Libya’s National Oil Corp. said Friday that it welcomed the country’s new cease-fire agreement and the nation should be able to resume exports when all of its facilities are freed from military occupation, threatening to unleash supply at a time when the OPEC+ alliance is easing output curbs.
U.S. benchmark crude futures posted a third straight weekly advance with this week’s inventory report showing shrinking domestic crude and gasoline supplies. Yet, virus cases continue to surge around the world and cautionary signals are emerging over the state of a global economic recovery. Italy on Friday reported new infections that were almost double the average for the past seven days, while South Korea may be heading toward a lockdown.
“Until we get a reopening in the economy, we’re not going to see any real price fluctuation in the oil market,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. “When you see an uptick in the economy, you’ll see a more optimistic view” for crude demand.
- West Texas Intermediate for October settlement fell 48 cents to settle at $42.34 a barrel.
- Brent for the same month declined 55 cents to end the session at $44.35 a barrel.
Still, China is signaling demand for U.S. crude. American oil exports to the country are set to reach a record next month in a sign that Beijing is stepping up purchases to meet its commitments under a trade deal. About 19 tankers have signed provisional bookings to load American crude for China in September, according to shipping fixtures.
Meanwhile, operators are beginning to prepare for storms that are on course to reach the Gulf of Mexico next week. BP Plc has begun evacuating employees from its four operated platforms in the Gulf of Mexico ahead of Tropical Depression 14 and Tropical Storm Laura.
“The precaution will likely serve to bolster the value of U.S. crudes against European crudes,” said Tom Finlon of GF International. “But it’s not enough to cause the market itself to go up.”
The spread between front-month U.S. benchmark crude futures and Brent crude rallied on Friday to its narrowest discount since late July. Gulf Coast cash gasoline advanced to a 10-month high against Nymex futures on Friday, data compiled by Bloomberg show.
Other oil-market news:
- Saudi Aramco has suspended a deal to build a $10 billion refining and petrochemicals complex in China, according to people familiar with the matter, as the company slashes spending to cope with low oil prices.
- Explorers in the world’s biggest shale patch are roaring back, putting an additional 10 rigs to work this week for the biggest jump in activity since a price crash triggered an unprecedented collapse in drilling.
- A pipeline explosion and fire at one of the nation’s busiest oil export hubs forced the shuttering of the inner harbor at the port of Corpus Christi, Texas.
–With assistance from Saket Sundria, James Thornhill, Sharon Cho, Alex Longley and Jack Wittels.
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