A health-care worker administered a Covid-19 test earlier this week in Houston; concerns about a surge in coronavirus cases have contributed to a decline in oil prices.
Photo: mark felix/Agence France-Presse/Getty ImagesOil prices edged lower Friday to cap the second weekly decline since April, as investors adjusted expectations to account for rising crude inventories and surging U.S. coronavirus cases.
U.S. crude futures for delivery in August dropped 0.6% to $38.49 a barrel on the New York Mercantile Exchange, following a 1.9% gain Thursday. That marked a 3.4% decline in front month futures for the week.
Oil prices have staged a weekslong recovery to trade above $40 as of last week. But prices dropped below that level Wednesday after government data showed U.S. crude storage swelled by 1.4 million barrels to 540.7 million. The weekly increase was larger than analysts and traders surveyed by The Wall Street Journal expected.
Oil prices dropped after government data showed U.S. crude storage had swelled.
Photo: johannes eisele/Agence France-Presse/Getty ImagesRising U.S. crude inventories could hamper the recovery in oil prices. Some analysts worry fuel consumption will remain tepid because of lingering coronavirus concerns. A jump in inventories signals plenty of crude remains available, but inventories in some U.S. hubs and globally have been declining.
The demand concerns are being weighed against supply cuts. The Organization of the Petroleum Exporting Countries and its allies have undertaken record production cuts to help buoy crude prices. Such fears, paired with a production feud between Saudi Arabia and Russia earlier in the year, led to a surge in global stockpiles that sent oil futures below $0 in April.
Brent crude futures for September delivery, the global gauge of oil prices, fell 0.5% to $40.93 a barrel Friday on the Intercontinental Exchange.
Investors are wondering whether a surge in U.S. cases of Covid-19, the disease caused by the new coronavirus, may weaken the recovery in demand for oil and gasoline. Nine of the top 20 gasoline-consuming states are showing an upward trend in new cases, according to analysts at Standard Chartered. Some governors are enacting new measures to help contain the outbreak.
Stocks also fell Friday, heading toward a weekly decline as the U.S. saw a daily record of nearly 40,000 new coronavirus cases. Four states—Texas, Florida, California, and Arizona—accounted for nearly half of the total.
In Texas, Gov. Greg Abbott ordered all bars to close and put restrictions on outdoor gatherings amid the state’s surge in cases. On Thursday, Mr. Abbott paused reopening plans, but said he wouldn’t clamp down where the state had relaxed restrictions.
U.S. oil and gas firms in Texas and the surrounding area don’t expect global oil consumption to return to the levels seen before the coronavirus until late next year or later. A recent survey by the Federal Reserve Bank of Dallas found around 51% of respondents expect such a recovery by the fourth quarter by the late 2021 or later, if not at all.
“Higher rates of working from home and fewer leisure trips this summer are likely to further hamper oil demand in the developed market,” said Bethany Beckett, economist at Oxford Economics, in a note.
Elsewhere in commodities Friday, most actively traded gold futures rose 0.6% Friday to $1,780.30 a troy ounce. Earlier in the week, gold prices surpassed a 7 ½ -year high, as a surge in American coronavirus cases have helped spur demand for bullion.
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Write to Sebastian Pellejero at sebastian.pellejero@wsj.com
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