We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Wed 17 Jun 2020 11:16 AM

Font Size

- Aa +

Oil pares decline with markets shrugging off new wave of coronavirus cases in China

Prices are being aided by massive supply cuts by the Organisation of Petroleum Exporting Countries and its allies

Oil pares decline with markets shrugging off new wave of coronavirus cases in China

Oil pared an earlier decline as equities rose, shrugging off some concerns about a second wave of coronavirus cases in China.

Futures in New York were 0.7% lower, after falling as much as 3.1%. Stock markets in Europe gained as traders looked at stimulus measures to help boost the economy, including in the US. However, any recovery is fraught with risk as a new phase of virus infections emerges in Beijing, forcing the government to close all schools and cancel more than 1,200 flights.

“Market players seem to remain unconcerned about a second Covid-19 wave impacting oil demand and probably think that central bank and fiscal stimulus will support economic activity,” said Giovanni Staunovo, commodity analyst at UBS Group AG.

Though crude’s path back to normal demand levels is patchy, there are signs that the physical market continues to recover. In Europe, key swaps that help price millions of barrels of the world’s oil are trading in a structure that indicates tight supply, while derivatives that contribute to valuing Russian crude are also firming.

Prices are being aided by massive supply cuts by the Organisation of Petroleum Exporting Countries and its allies. The group’s compliance with its cutback target was 87% in May, a delegate said. Usual laggards, such as Iraq and Nigeria, are also starting to toe the line.

Still, there one metric that’s complicating things for the big producing countries. The American Petroleum Institute reported U.S. crude stockpiles rose by 3.86 million barrels last week, according to people familiar with the data. Inventories grew to a record in the previous week, official figures showed, despite output having fallen by at least 2 million barrels a day since March. Official data for last week is due later on Wednesday.

“Day-to-day oil trading has become a tussle between bearish oil data, particularly under-powered demand recoveries and record-high inventories, and top-down macro-led expectations of better things to come,” said Standard Chartered analysts including Emily Ashford.

Arabian Business: why we're going behind a paywall

For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.