Oil snapped a two-day losing streak on growing signs that consumption in key regions is edging higher.
Crude demand in Asia is almost back to pre-virus levels, Saudi Aramco chief executive officer Amin Nasser said Sunday. Meanwhile, U.S. oil drilling has sunk to a 15-year low as the industry continues to face job cuts and uncertainty. The number of active global rigs also shrank again in July as explorers abandoned growth plans and billions of barrels from old discoveries became worthless.
Oil last week broke through the top end of the range where it’s been stuck for months, but momentum faltered as rising virus infections raised doubts about a sustained economic recovery. At the same time, OPEC+ is set to test the demand outlook as it returns some supply to the market this month following historic production cuts.
“A lot of traders are still thinking of V-shaped recoveries for oil demand and the economy, but we don’t think that is going to happen,” said Paul Horsnell, head of commodities research at Standard Chartered. The market has seen “no convincing sustained break up or down and remarkably low volatility.”
- West Texas Intermediate for September delivery rose 1.4 per cent to $41.78 a barrel as of 8:27 a.m. New York time
- Brent for October settlement climbed one per cent to $44.82
In a sign of recovering consumption, the quantity of commercial flights around the world rose almost six per cent in the seven days to Sunday, according to FlightRadar24 data. The average number of 67,000 planes in the sky was still far below the more than 100,000 pre-COVID.
There are also still plenty of reasons to be concerned about the pace of the recovery. The 3-2-1 refining margin for combined gasoline and diesel against U.S. WTI – a rough profit gauge for processing a barrel of crude – was at its weakest level since June on Friday.
© 2020 Bloomberg L.P.