U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday, but are still set for a weekly decline due to mounting worries about the impact on fuel demand of a widespread resurgence in coronavirus infections, as well as some concern about the likely return of exports from Libya.
U.S. crude oil is on track for a decline of around 2% and Brent is heading for a drop of nearly 3% this week. Both benchmarks are also heading for a monthly decline, which would be the first for Brent in six months.
“The outlook for oil demand remains challenging as prospects of new mobility restrictions continue to rise,” ANZ Research said in a note.
U.S. fuel demand remains under pressure as the pandemic constrains travel. The four-week average of gasoline demand last week was 9% below a year earlier, government data showed on Wednesday. Demand is likely to weaken over the near-term because the increasing coronavirus numbers are slowing the economic recovery.
In the United States, which has the highest death toll from the coronavirus pandemic and is the world’s biggest oil consumer, unemployment claims unexpectedly rose last week suggesting an economic recovery is sputtering and pushing down fuel demand.
Globally, in other parts of the world, the situation is getting even worse. Daily increases of coronavirus infections are hitting records and new restrictions are being put in place that will likely limit travel and fuel demand.
While most traders are monitoring the situations in Europe and Asia, there are bearish developments in India too. According to reports, throughput by crude oil refiners in August fell 26.4% from a year ago, the most in four months, as fuel demand ebbed because surging coronavirus cases hindered industrial and transport activity.
Global Supply Issues Remain
Although OPEC+ is doing its best to curtail global supply with its massive production cuts, and could do more if called upon, there could be a problem if Libya brings more oil to the market.
In Libya, an oil tanker was loading cargo on Thursday from one of three Libyan terminals that were reopened in recent days and more cargoes are expected to be lifted in the coming days. It may look bearish on the surface, but analysts are questioning how quickly the country could ramp up supply.
Fundamentally, this week showed no major changes. Demand issues are keeping a lid on prices and OPEC+ is providing some support. This suggests a rangebound trade over the near-term like we saw in the July to August timeframe, except at lower price levels.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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