Oil rises on improved forecast for demand recovery

By Devika Krishna Kumar NEW YORK (Reuters) - Oil prices climbed more than 2% on Friday after the International Energy Agency (IEA) bumped up its 2020 demand forecast but record-breaking new coronavirus cases in the United States tempered expectations for a fast recovery in fuel consumption.

Reuters July 11, 2020 00:07:27 IST
Oil rises on improved forecast for demand recovery

Oil rises on improved forecast for demand recovery

By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices climbed more than 2% on Friday after the International Energy Agency (IEA) bumped up its 2020 demand forecast but record-breaking new coronavirus cases in the United States tempered expectations for a fast recovery in fuel consumption.

Prices also found support after data showed U.S. energy firms cut the number of oil and natural gas rigs operating to a record low for a 10th week in a row, even as the rate of decline has slowed.

Brent crude was up $1.02, or 2.4%, at $43.37 a barrel by 1:59 p.m. ET (1759 GMT), and U.S. oil was up $1.08, or 2.7%, to $40.70 a barrel.

Oil prices were also boosted by strength in the equities market. A slate of economic data, including a record monthly payrolls addition, has pointed to a revival in business activity in June, fueling the U.S. stock market's stimulus-driven rally.

U.S. crude was little changed on the week while Brent is set for a weekly gain of about 1.3%.

The Paris-based IEA raised its demand forecast to 92.1 million barrels per day (bpd), up 400,000 bpd from its outlook last month, citing a smaller-than-expected second-quarter decline.

Still, more than 60,500 new COVID-19 cases were reported in the United States on Thursday, setting a daily record. The tally was also the highest daily count yet for any country since the pathogen emerged in China late last year.

"While the oil market has undoubtedly made progress ... the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control," the IEA said.

Graphic: Demand supply balance, https://fingfx.thomsonreuters.com/gfx/ce/oakvealagvr/IEA%202.JPG

Prices had dropped early in the session after Libya National Oil Corporation announced it had lifted its force majeure on all oil exports after a half-year blockade by eastern forces.

"The expected re-start of Libyan exports will only add to the vulnerability of the OPEC+ production restraint in keeping the energy complex heavily reliant upon a renewed expansion in risk appetite for any advances back to around this week’s highs," Jim Ritterbusch, president of Ritterbusch and Associates, said.

Meanwhile, oil inventories remain bloated due to the evaporation of demand for gasoline, diesel and other fuels during the initial outbreak.

"If we take a bigger picture view of the market, what stands out to us is that we have not yet seen much of a decline on the global inventory front," JBC said.

U.S. crude oil inventories rose by nearly 6 million barrels last week after analysts had forecast a decline of just over half that figure. [EIA/S]

The rising tension between the United States and China also put pressure on prices. China said on Friday it would impose reciprocal measures in response to U.S. sanctions on Chinese officials over alleged human rights abuses against the Uighur Muslim minority.

(Reporting by Devika Krishna Kumar in New York; additional reporting by Bozorgmehr Sharafedin in London, Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and Louise Heavens)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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