Crude-oil futures headed modestly higher on Friday but were on pace to halt a streak of six weekly gains, as worries about oversupply, combined with fears of a resurgence of the coronavirus in the U.S., knocked crude values down.
“Should the spike in Covid-19 cases in some US states gather momentum and derail the economic recovery, that could clear the path towards lower prices for crude,” wrote Han Tan, market analyst at FXTM, in a Friday research note.
West Texas Intermediate crude for July delivery, the U.S. benchmark, edge up 17 cents, or 0.5%, at $36.51 a barrel, after the contract tumbled 8.2% on Thursday to mark its sharpest one-day fall since April 27 with the lowest settlement since June 1, according to Dow Jones Market Data.
Global benchmark Brent oil for August delivery picked up 32 cents, or 0.8%, at $38.87 a barrel on ICE Futures Europe, following a 7.6% plunge, its steepest such slide since April 21, that also took it to its lowest level since June 1.
For the week, WTI is poised for a weekly slide of 7.5%, while Brent was looking at a decline of 8%.
A decline for either would represent the first since the week ended April 24, according to FactSet data.
Thursday’s “risk aversion in the markets prompted crude oil to unwind most of its month-to-date gains as it slipped below the psychologically important $35/bbl level before retracing,” Tan wrote.
Worries about the outlook for the economy and consumer and business demand for energy in the aftermath of the COVID-19 pandemic have weighed on crude prices.
“Oil markets are looking past the recent extension to the OPEC+ supply cuts, as demand-side uncertainties return to the fore,” the FXTM analyst said.
Indeed, the International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring,” Bloomberg News reported.
Worries of a resurgence of the pandemic has added to recent concerns about the ability of the Organization of the Petroleum Exporting Countries and its allies, in a group known as OPEC+, to curtail global production by 9.7 million barrels a day through July.
Despite the worries, analysts at Barclays remain bullish on the outlook for the oil market, even if they expect the pace of recovery from the depths of oil’s rout in April to slow.
“As we mark to market our [second quarter] estimates and account for a potentially larger [second half] deficit, we raise our 2020 oil price forecasts by $4/b but remain cautious with respect to the curve over the near term,” wrote Amarpreet Singh, vice president of oil strategy at Barclays, in a late Thursday research note, referring to Brent oil.