(C) Reuters. Oil Fluctuates Near $40 as Market Braces for Higher OPEC Supply
(Bloomberg) — Oil held near $40 a barrel in Asia, with gains capped by uncertain prospects for a demand recovery from coronavirus as OPEC+ producers start to unwind their production cuts.
Futures in New York rose as much as 0.4% before declining 0.4%, after gaining 0.9% on Friday. The market rose 2.5% in July as the producer bloc’s historic output curbs helped to ease a supply glut brought on by pandemic lockdowns. However, the rally has stalled north of $40 amid a resurgence of the virus across U.S. southern states. Cases in California accelerated further at the weekend.
OPEC+ plans to return about 1.5 million barrels a day to the market in August after cutting global supply by roughly 10% when demand plunged. Russia slightly increased its oil production in July ahead of the scheduled start of the OPEC+ easing of curbs.
U.S. consumer sentiment extended its slide in late July as the virus led to renewed business closings and layoffs, casting doubt on the outlook for a demand recovery. Exxon Mobil Corp (NYSE:XOM). and Chevron Corp. (NYSE:CVX) posted their worst losses in a generation as the virus combined with a global crude glut to batter their businesses.
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Pointing to further weakness, gasoline refining margins are at the lowest seasonal level in years, showing refiner profitability is facing pressure as the pandemic keeps Americans at home and off the road.
Shale explorers reduced drilling last week as the rebound in oil prices failed to revive confidence. The number of active oil rigs in the U.S. fell by 1 to 180, bringing it back to the lowest level since June 2009, according to Baker Hughes Co. data released Friday. Still, shale producers are also signaling supply will come roaring back over the next few months with futures near $40 a barrel. ConocoPhillips (NYSE:COP) said last week that it will restart most wells that were shut by September.
(C)2020 Bloomberg L.P.
Oil Fluctuates Near $40 as Market Braces for Higher OPEC Supply
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