SYDNEY — Oil steadied in New York as the boost from a weaker dollar offset concerns that the resurgence of coronavirus will crimp fuel demand.
Futures held above $38 a barrel, recouping earlier losses of 2.6% as the slide in the U.S. currency made dollar-priced commodities an attractive hedge. Still, sentiment in crude markets remained fragile after last week’s 3.2% slide.
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.
– West Texas Intermediate for August delivery rose 11 cents to $38.60 a barrel as of 11:57 a.m. London time
– Brent for the same month, which expires Tuesday, was unchanged at $41.02. The more active September contract was also flat
– The global benchmark’s six-month timespread was 87 cents in contango compared with 62 cents on Friday
Prices would likely fall 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.
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*Elizabeth Low & Grant Smith – Bloomberg