Oil prices down on demand worries, growing supply

[NEW YORK] Oil prices edged lower on Friday on worries that demand would recover more slowly than expected from Covid-19 pandemic lockdowns, while rising supply also overshadowed optimism over falling crude and fuel inventories.

This week, two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts. Opec and its allies are increasing output this month.

"The big-picture question is whether the spread of coronavirus is going to continue to impact on the return of gasoline and diesel demand," said Andy Lipow of Lipow Oil Associates in Houston.

Brent crude settled at US$44.80 a barrel, falling 16 cents. US West Texas Intermediate settled at US$42.01 a barrel, down 23 cents.

For the week, Brent was up 0.9 per cent and WTI gained 1.9 per cent.

Prices were bolstered earlier in the week by US government data showing crude oil, gasoline and distillate inventories falling last week as refiners ramped up production and demand for oil products rose.

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"If that trend continues, it's very supportive of prices and should drive prices higher," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The number of US oil and gas rigs, an indicator of future supply, fell this week for a 15th straight week to record lows, according to energy services firm Baker Hughes.

"The market wants to break out, but we don't seem to be able to follow through just yet because of these lingering questions about the coronavirus," Mr Flynn said.

Oil has recovered from lows touched in April, when WTI briefly turned negative. Still, a rise in the number of novel coronavirus infections has limited gains. India reported another record daily rise in cases on Thursday.

Opec and allies including Russia, a group known as Opec+, have cut output since May by around 10 per cent of pre-pandemic global demand to support the market. The deal calls for an increase in output this month as demand recovers.

An Opec+ panel meets on Wednesday to review the market.

REUTERS