Oil Set for Weekly Gain - Rigzone

(Bloomberg) -- Oil in New York is poised for the biggest weekly advance since early July after U.S. stockpiles plunged further, but the market is facing more OPEC+ supply and still contending with virus-driven demand weakness.

Futures rose above $42 a barrel this week to the highest level in five months with support from a weaker dollar and as U.S. crude inventories posted the biggest back-to-back weekly decline in a year. OPEC and its allies are set to test the appetite for demand as they start returning some supply this month after historic cuts, although Iraq has pledged to trim its output further in August to compensate for missing its target in previous months.

Meanwhile, crude imports into China dropped in July from a record the previous month, with vessels delayed in unloading cargoes as ports became congested with tankers carrying cheaper oil purchased earlier in the year.

Oil is showing some signs of rising out of a tight range after being stuck near $40 a barrel since early June as surging coronavirus infections put a cap on a rally from below zero. A sustained recovery in consumption is still looking shaky, with Saudi Arabia cutting pricing to Asia for its main grade for the first time in four months -- although by less-than-expected -- as producers face pressure to reduce the cost of their crude.

“Concerns over continuing oil demand recovery remain in place,” said Vandana Hari, founder of Vanda Insights in Singapore, adding that the recent price rally is almost entirely driven by a weaker U.S. dollar. “The pandemic is not worsening, but it’s not becoming any better either.”

President Donald Trump, meanwhile, signed orders prohibiting U.S. residents from doing business with the Chinese owned TikTok and WeChat apps beginning 45 days from now due to national security risks, escalating tensions between the two world’s biggest economies. American and European equity futures fell.

Prices

West Texas Intermediate for September delivery lost 0.4% to $41.77 a barrel on the New York Mercantile Exchange as of 7:50 a.m. London time after falling 0.6% on Thursday Futures are up 3.7% so far this week after closing Wednesday at the highest level since March 5 Brent for October settlement fell 0.4% to $44.92 on the ICE Futures Europe exchange after slipping 0.2% in the previous session The contract is up 3.7% this week

Iraq, the second-biggest OPEC producer, will reduce production by an additional 400,000 barrels a day this month, according to state oil-marketing organization SOMO. The cuts come as OPEC+ pumps about 1.5 million barrels a day more in August than in July.

China’s crude imports in July dropped to 51.29 million tons, equivalent to 12.13 million barrels a day, down from 53.18 million tons in June, according to customs data released Friday.

Other oil-market news

Several Asian refiners struggling with weakening demand will ask Saudi Arabia for less crude next month after the kingdom cut official selling prices by a smaller amount than the processors had been hoping for. Kuwait Petroleum Corp. said the announcement of its crude official selling prices for September sales will be postponed beyond Aug. 10 due to the Eid al-Adha holiday.

--With assistance from James Thornhill.

To contact the reporters on this story:
Low De Wei in Singapore at dlow47@bloomberg.net;
Saket Sundria in Singapore at ssundria@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples, Andrew Janes

© 2020 Bloomberg L.P.

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