Oil rises on improving economic data but virus worries loom
Oil prices rose on Monday, supported by improving economic data though a spike in new coronavirus infections around the world capped the gains as some countries were forced to reimpose partial lockdowns.
Brent crude rose 15 cents, or 0.4%, to $41.17 a barrel by 1145 GMT and U.S. crude was up 26 cents, or 0.7%, at $38.75. Both contracts had fallen almost $1 earlier in the session.
Crude prices found some support as profits at China’s industrial firms rose for the first time in six months in May, suggesting the country’s economic recovery is gaining traction.
The recovery of economic sentiment in the euro zone also intensified in June after a modest pick-up in May, with improvements across all sectors and a much more buoyant sense of future business, European Commission data showed.
However, fears of a second wave of the pandemic took the shine off the improving economic data.
The death toll from COVID-19 surpassed half a million people on Sunday, according to a Reuters tally.
“Looking ahead, anxiety is likely to remain heightened as the epic fight against the coronavirus pandemic continues. This spells bad news for risk assets (such as oil) which will inevitably remain under pressure,” said Stephen Brennock of broker PVM.
In the United States, California ordered bars to close on Sunday following similar moves in Texas and Florida after a jump in cases. Washington state and the city of San Francisco have paused their reopening plans.
“Whilst these localised measures on their own are unlikely to see any major immediate impact on demand, they do highlight the significant risk to gasoline demand,” JBC Energy said.
Oil also found some support from the dollar’s weakness. Oil prices tend to move inversely to the U.S. currency.
Brent is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.
U.S. and Canadian energy firms have cut the number of oil and natural gas rigs operating to a new record low even as higher oil prices prompt some producers to start drilling again.
“No massive investments are likely to be made in the foreseeable future given the gigantic mountains of debt and the considerable financial risks,” said Commerzbank analyst Eugen Weinberg.
U.S. shale oil pioneer Chesapeake Energy Corp filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of the coronavirus outbreak on energy markets.
Source: Reuters (Reporting by Bozorgmehr Sharafedin in London, additional reporting by Florence Tan in Singapore; Editing by Kirsten Donovan and David Clarke)