(Bloomberg) Oil held near $42 a barrel in London as investors weighed signs of rebounding demand against a resurgence in new coronavirus cases.A rise in coronavirus cases in Germany and the recent jump in China are underpinning the difficulty for oil consumption to return to levels seen before the pandemic. Still, OPEC and its allies are on track to rebalance the oil market and there are encouraging signs of recovery, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told an OPEC+ meeting last week.
The oil market has shown signs of renewed strength in recent days. Its structure has rallied and traders have said demand is recovering rapidly following the easing of lockdown restrictions. India, one of the world’s largest consumers, said it has filled its strategic reserves to capacity. Still, in a reminder of the glut the oil market has to clear, the amount of crude stored at sea jumped last week, according to Vortexa.
“Oil prices have already reached an interim stage of recovery,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy AS. Crude reaching $45 to $50 a barrel “would not be justified at this stage despite the supply curtailments as there are still valid concerns on the demand side,” he said.
Brent futures for August gained 17 cents, or 0.4%, to $42.37 a barrel as of 10:28 a.m. in London
West Texas Intermediate for July, which expires Monday, was unchanged at $39.75
The more active August contract was up 35 cents to $39.97
The Americas region accounted for almost two-thirds of new virus cases reported by the World Health Organization on Sunday. China suspended poultry imports from a Tyson Foods Inc. plant in the U.S. after hundreds of employees tested positive for Covid-19.
Meanwhile, as the oil market returns to health, speculators are starting to put money back into products they had shunned during its rout. Money mangers had their biggest net-long position in Europe’s diesel benchmark since January last week, according to ICE Futures Europe data. In contrast, bullish bets declined for WTI and were steady for Brent.
Other oil-market news:
Bank of America has raised its Brent crude forecasts, seeing a faster demand recovery, deep cuts to global capex and strong commitment by OPEC+, according to a report received Monday.
Asian refiners may have hit a brick wall in their recovery from the virus-driven slump with the rebound in fuel demand not big enough to clear a massive glut built up over the last few months.
Hedge funds reduced their net bullish wagers on WTI crude by 7.1% in the week ended June 16, the first retreat since March, data from the U.S. Commodity Futures Trading Commission showed Friday.
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