By Elizabeth Low and Grant Smith
Futures fell toward $40 a barrel in New York, but are still up 4.3% for the week. Crude rose along with broader markets on Thursday as data showed a rebound in the U.S. jobs market accelerated in early June. That came after American crude stockpiles shrunk by the most this year and a survey showed OPEC oil production dropped last month to the lowest since 1991.
The virus continues to surge unabated across large parts of the U.S., however, clouding the outlook for energy demand. The worsening outbreak may not have been fully captured in the jobs data, which provided a snapshot of hiring in the middle of the month before many states reversed course on their re-openings.
Oil has hovered around $40 a barrel this week as the murkier demand outlook was balanced by the OPEC+ alliance’s commitment to reducing output, with Russia showing near total compliance with its targets for a second month. The group hasn’t made any decision yet on whether to extend its full cutback — which stands at 9.6 million barrels a day — into August, Russian Energy Minister Alexander Novak said. Ministers from the coalition next meet on July 15.
“The oil market is tightening as OPEC+ enjoys success in delivering pledged output cuts,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “Yet it is clear that uncertainty still abounds for the demand side of the oil equation. The threat of a second wave of coronavirus infections is the major wild-card for the oil market.”
West Texas Intermediate for August delivery fell 1.4% to $40.10 a barrel on the New York Mercantile Exchange as of 10:26 a.m. in London after closing up 2.1% on Thursday. Brent for September settlement declined 1.2% to $42.62 on the ICE Futures Europe exchange, paring its weekly gain to 4.1%.
The global benchmark crude’s three-month timespread was 25 cents in contango — where prompt contracts are cheaper than later-dated ones — from 41 cents in contango on Tuesday. The change in the market structure indicates that concerns about over-supply have eased slightly this week.
The slump in U.S. oil production continued as working rigs fell for a 16th week to the least since 2009, according to Baker Hughes data released Thursday. Exxon Mobil Corp., meanwhile, reported an unprecedented second straight quarterly loss as almost every facet of the energy giant’s business slumped.
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