Oil dipped on Friday, falling more than 2% on the week as COVID-19 cases surged globally and all those thoughts about an improving oil supply position evaporated.
“There is this second wave of fear overhanging the oil market at this point and that’s holding us back,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. told Reuters
That saw Brent crude futures end 2 cents lower in Europe on Friday at $US41.92 a barrel, while in New York West Texas Intermediate (WTI) crude futures lost 6 cents to settle at $US40.25 a barrel.
At the close, Brent had dropped 2.9% for the week and WTI had lost 2.6%
“Investors have become more cautious this week in general…as recent increases in coronavirus cases has increased questions over what a second wave could mean for the world economy and resource demand,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.com.
The rebound in the US dollar this week has also hit oil prices.
The rising number of new COVID-19 cases in Europe saw fears of a new fall in demand for oil overtake the optimism in some US oil circles that demand was stabilising.
Meanwhile, concerns about demand have been underlined by pressure on refining margins.
Supply-related worries were boosted by reports that Libyan output is set to pick up after a military commander moved to lift a blockade of ports that has virtually strangled production for the past eight months.
US stocks rose last week and four rigs were activated last week to look or produce oil, taking the weekly total to 183 this week. That was the first weekly rise since the week ended September 4 and one of the largest weekly rises for some months.
Meanwhile, the continuing oversupply of distillates (because of rising demand for petrol and weak demand for diesel and jet fuel) is depressing refining margins and forcing refineries to operate at or near losses.
“In short, refiners are pulling all the possible levers to minimize jet production, yet distillate stocks remain stubbornly high. Based on our global mobility tracker, we estimate that 43% of U.S. flights remain sidelined, which models to 820,000 barrels a day of US jet fuel demand destroyed daily,” Tran said in his note.
Weak demand for jet fuel from the local aviation industry continues to bedevil the three remaining refineries in Australia.
