Oil extends slump on coronavirus resurgence fears

An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia.

Simon Dawson | Bloomberg | Getty Images

Oil prices fell on Friday, extending heavy overnight losses as a surge in U.S. coronavirus cases this week raised the prospect of a second wave of the COVID-19 outbreak hitting demand in the world’s biggest consumer of crude and fuel.

Brent shed 20 cents to trade at $38.35 per barrel, while West Texas Intermediate declined 1.7%, or 62 cents, to $35.72 per barrel.

The oil benchmarks are heading for weekly declines of more than 8%, their first after six weeks of gains which have lifted them off their April lows.

Fears that the coronavirus pandemic may be far from over has brought the rally to a halt, with about half a dozen U.S. states seeing a spike in new infections.

Barclays on Friday raised its oil price forecasts for this year by $4 per barrel, citing a bigger deficit in the second half of the year, although it expressed caution on a slow recovery in the near term.

“The rate of change in fundamentals is likely to moderate significantly as incremental demand improvement will depend more on consumer behaviour than the easing of enforced movement restrictions,” the British bank said in a note.

Producers from the United States, as well as from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, have been cutting supply.

OPEC+ cut oil supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand, and agreed last weekend to extend the reduction.

U.S. crude and gasoline stockpiles grew last week, government data showed. U.S. crude inventories hit a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.

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