By Sharon Cho and Alex Longley
Oil fell as the coronavirus pandemic continues to cloud the demand outlook.Europe’s economy unexpectedly lost momentum this month, causing concerns over energy consumption and showcasing the challenge to growth. The region is battling to control a new spike in virus cases while trying to avoid renewed lockdowns.
Since prices touched a five-month high at the start of this month, U.S. crude futures have barely moved, trading in a $2.50 range. This week the Federal Reserve and OPEC+ cast doubt on the outlook for the global economy and oil demand respectively. Still, prices are set to eke out a gain for the week after data earlier showed American crude and gasoline stockpiles shrank.
Prices are being kept in check by rising production, particularly from OPEC+ and Canada, “and the demand recovery slowing down markedly,” said Helge Andre Martinsen, analyst at DNB Bank ASA.
The dollar also gained on Friday, making commodities priced in the currency more expensive. Brent’s prompt spread — the price difference between the front-month and the following month’s contract — was near the widest contango since May, signaling concerns about over-supply.
With a gloomy outlook for consumption, oil refineries are starting to feel the squeeze. Exxon Mobil Corp.’s Baton Rouge refinery in Louisiana is idling one of two gasoline-making units due to low demand, according to a person familiar with operations. The plant shut a different type of unit this month, and poor margins may mean more U.S. Gulf refiners take less of the heavy crude grades in August and September, according to traders.
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