Oil heads for weekly loss on coronavirus resurgence fears

An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia.

Simon Dawson | Bloomberg | Getty Images

Oil was little changed on Friday and headed for a first weekly fall since April as new U.S. coronavirus cases spiked, raising the prospect of a second wave of the virus hitting demand.

Brent was up 29 cents at $38.84 a barrel by, while West Texas Intermediate lost 7 cents to $36.99 a barrel.

The oil benchmarks are heading for weekly declines around 8%, their first after six weeks of gains that have lifted prices off April lows.

Fears that the coronavirus pandemic may be far from over has brought the rally to a halt, with about half a dozen U.S. states seeing a spike in new infections.

“We definitely have an explosion of cases in areas that were not really affected before,” said Bob Yawger, director of energy futures at Mizuho. “That ultimately leads to less people driving, less demand for gasoline. At the same time, you have an all-time record crude oil number.”

U.S. crude oil inventories have risen to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.

The build happened despite producers from the United States, as well as from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, cutting supply to try to balance the market.

OPEC+ slashed supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand, and agreed last weekend to extend the reduction.

Barclays raised its oil price forecasts for this year by $4 per barrel, citing a bigger deficit in the second half of the year, although it expressed caution on a slow recovery in the near term.

“Incremental demand improvement will depend more on consumer behaviour than the easing of enforced movement restrictions,” the British bank said in a note

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