Oil posts second weekly loss in June on surge in US Covid-19 cases

Futures in New York slipped 3.2 per cent this week, following a run of weekly gains

A mobile offshore drilling unit stands in the Port of Cromarty Firth in Cromarty, U.K., on Tuesday, June 23, 2020. Oil headed for a weekly decline -- only the second since April -- as a surge in U.S. coronavirus cases clouded the demand outlook, though the pessimism was tempered by huge cuts to Russia's seaborne crude exports. Photographer: Jason Alden/Bloomberg
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Oil posted its second weekly loss for the month, as a surge in US coronavirus cases clouds the demand outlook and casts doubts on the market’s recovery.

Futures in New York slipped 3.2 per cent this week. The price slump comes just days after oil closed above $40 for the first time since early March, and following a run of weekly gains that lifted oil from its historic plunge below zero in April. Texas – the centre of the American oil industry – halted its reopening as virus infections jumped, and Houston’s intensive-care wards reached capacity. Bars in Texas and Florida were ordered to shut, and Arizona reported a surge in infections.

“This week the market pushed through a three-and-a-half month high, and then all the sudden reporting about new cases seemed to break the back of the rally,” said Gene McGillian, vice president of research at Tradition Energy. “We have record amounts of oil and fuel in storage and still uncertainty about demand going forward.”

While massive Opec+ output cuts and a pickup in demand have helped crude climb from its April low, price gains have slowed this month. Infections continue to soar in many parts of the world, consumption is still a long way off pre-virus levels and many refiners are struggling with low margins.

Crude stockpiles in the US are at record highs, and there’s a risk that US shale producers could start bringing back output. The number of rigs drilling for oil fell by 1 to 188, the lowest since June of 2009.

“As the market pushes past $40, US producers are going to ramp production,” Mr McGillian said.

Huge cuts to Russia’s seaborne crude exports lifted oil earlier in the session. Shipments of the flagship Urals grade from its three main western ports are set to plunge by 40 per cent next month, according to loading programmes seen by Bloomberg. The steep reductions underscore the Opec+ alliance’s commitment to eliminate the oil glut that built up earlier this year.