(Bloomberg) Oil erased gains to trade near $44 a barrel in London as concerns about demand countered the buoying effect of a weaker dollar.Brent futures slipped from near their highest level since March. Though crude was earlier supported by a less vigorous dollar, bearish signs persist in the physical market. China’s cooling oil demand has affected prices for Iraqi crude, and derivatives that help value North Sea grades showed renewed weakness. In America, crude stockpiles rose by 5 million barrels last week.
Oil jumped earlier this week after European Union leaders agreed on a stimulus package, but prices have struggled to break out of a tight range this month. While the race for a coronavirus vaccine intensifies, rising infections across major economies and the imminent easing of OPEC+ output cuts is keeping a lid on further price gains amid a patchy recovery in consumption.
“Uncertainty comes from demand,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. “It is imperative to follow the dollar exchange rate, as a layer of oil-demand support will disappear should the greenback start strengthening again.”
Prices
Brent for September settlement fell 0.5% to $44.09 a barrel at 12:43 p.m. in London
Brent’s September-October timespread weakened by 7 cents to a contango structure of minus 34 cents, a sign of oversupply
West Texas Intermediate for September delivery also erased earlier gains, falling 0.4% to $41.73 a barrel
The recovery in U.S. gasoline demand has faltered, with Americans staying at home as the virus flares in the nation’s most populous states. The outlook wasn’t much better in Europe, with Finnish refiner Neste saying it expects oil products demand to be “severely reduced” in the third quarter.
Other oil-market news:
Mexico will check prices closely before plunging into its annual oil hedge for next year because an erratic crude market is making the program more expensive, Finance Minister Arturo Herrera said.
The return of oil-sands production in Canada is slow, leaving the country’s normally congested pipelines with room to spare.
Driller Baker Hughes Co. is bracing for a second wave of lockdowns, saying the global economic contraction probably reached a nadir last quarter but that the outlook remains “extremely limited.”
Royal Dutch Shell Plc just drilled a dry hole in Brazil’s premier offshore region, a sign that state-controlled Petrobras may have already grabbed the best oil deposits and left competitors hunting for smaller game.
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