Oil prices rose on Tuesday after recent sharp losses, but market sentiment remains muted as surging COVID-19 cases around the world hurt the outlook for crude demand while supply is rising.
Brent crude was up 33 cents, or 0.8%, at $40.79 a barrel by 0751 GMT. U.S. oil gained 28 cents, or 0.7%, to $38.84 a barrel. Both contracts fell more than 3% on Monday.
A lack of progress on agreeing a U.S. coronavirus relief package added to market gloom, although U.S. House of Representatives Speaker Nancy Pelosi said on Monday she hoped a deal can be reached before the Nov. 3 elections.
A wave of coronavirus infections sweeping across the United States, Russia, France and many other countries has undermined the global economic outlook, with record numbers of new cases forcing some countries to impose fresh restrictions as winter looms.[MKTS/GLOB]
“We think demand from this point onwards is really going to struggle to grow. COVID-19 restrictions are all part of that,” said Commonwealth Bank of Australia (CBA) commodities analyst Vivek Dhar.
CBA expects U.S. oil to average $38 and Brent to average $41 in the fourth quarter this year.
Prices got some support from a potential drop in U.S. production as oil companies began shutting offshore rigs with the approach of a hurricane in the Gulf of Mexico.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the worst is over for the crude market.
But his comment was at odds with an earlier remark from the secretary general of the Organization of the Petroleum Exporting Countries (OPEC), who said any oil market recovery may take longer than hoped as coronavirus infections rise around the world.
“This dynamic will likely weigh on oil prices for the rest of 2020 and exert pressure on OPEC and its allies to keep restricting supply well into next year to try and protect Brent above $40 per barrel,” Eurasia Group said in a note.
Libyan production is expected to reach 1 million barrels per day (bpd) in the coming weeks, the country’s national oil company said on Friday, a quicker return than many analysts had predicted, complicating efforts by OPEC to restrict output.
OPEC+ - made up of OPEC and allies including Russia - is planning to increase production by 2 million bpd from the start of 2021 after record output cuts earlier this year.
An analyst survey by Reuters ahead of data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday estimated that U.S. crude stocks rose in the week to Oct. 23, while gasoline and distillate inventories fell.
Reporting by Aaron Sheldrick; additional reporting by Sonali Paul in Melbourne; editing by Shri Navaratnam and Richard Pullin