Oil Ends Down 3% on Week on Fears of More Economic Hurt from Covid

Commodities & Futures
© Reuters.  © Reuters.

By Barani Krishnan

Investing.com – Oil prices fell around 3% on the week on fears of more economic disruptions as Covid-19’s rampage continues to devastate the United States and the world.

Also weighing on crude was data from earlier in the week showing the first jump in U.S. output in three months, despite demand for fuel remaining fledgling at best. 

While the latest weekly reading for the posted on Friday barely showed a change, few had doubts that the near quadrupling of crude prices since April had prompted drillers in shale patches to turn the spigots back on and restore some wells shut at the height of the pandemic. 

“The oil demand recovery story has been dealt a blow with the U.S. registering the biggest-ever jump in coronavirus cases, suggesting many states may have to revisit regional lockdowns soon,” said Ed Moya, analyst at New York-based online trading platform OANDA.  

“The rapid demand rebound is not happening, but stimulus efforts, pauses in reopening of businesses and improved treatments for the virus are limiting the downward pressure on crude. States will do their best to avoid a complete reversal with reopening phases, so the economic recovery should not completely stall out.”

New York-traded , the benchmark for U.S. crude futures, was down 23 cents, or 0.6%, at $ 38.49 per barrel. 

London-traded , the global benchmark for oil, settled down 12 cents, or 0.3%, at $ 40.93.

For the week, WTI showed a decline of 3.2% while Brent was down 3%.

The United States reported more than 41,000 new cases on Thursday, the second consecutive day with a record total, with health officials saying the true national caseload was probably 10 times the official count. These come as more than 2.4 million Americans have already been infected, with the death toll breaching 123,000.  A new model by the University of Washington predicts 200,000 coronavirus deaths in the U.S. by Oct. 1. 

Globally, India, South Korea and New Zealand have all reported higher incidences of the Covid-19 in recent weeks.

The outlook for a global economic recovery has worsened or at best stayed about the same over the past month, according to a majority of economists in Reuters polls, with the ongoing recession expected to be deeper than predicted in May.

The U.S. Energy Information Administration, in its weekly update on Wednesday, said crude output was estimated at 11 million barrels per day for the week ended June 19, versus 10.5 million bpd in the previous week.

It was the first rise in U.S. production in 13 weeks. It comes after a 20% drop in output that followed the demand destruction for fuel caused by the coronavirus pandemic, after the record highs of 13.1 million bpd set in mid-March.

The production hike reported by the EIA for the week ended June 19 coincided with the 1.4 million-barrel build in for the week, versus the 300,000 barrel rise anticipated by forecasters.

On the fuel demand side, the EIA reported a decline of nearly 1.7 million barrels in , or about 400,000 more than expected. But to offset that, it also said , led by diesel, rose nearly 250,000 barrels against a forecast drop of 620,000.

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