Oil falls below $43 on virus fears, still heads for weekly gain

Andrew Cummings
July 3, 2020

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U.S. West Texas Intermediate (WTI) crude futures fell 10 cents, or 0.3 per cent, to $39.72 a barrel at 0148 GMT, trimming a 1.4 per cent rise from Wednesday.

Oil kept up its positive momentum going into the US holiday weekend, cheered by signs the world's biggest economy is recovering from coronavirus-related lockdowns, even as fears linger over a resurgence. USA crude CLc1 rose 59 cents, or 1.5%, to $39.86 a barrel.

A preliminary Reuters poll showed analysts expect US crude oil stockpiles fell from record highs last week and gasoline inventories decreased for a third straight week.

A surge in new infections in the United States has anxious some investors, but most are betting this will not be enough to derail a broader rebound in the global economy.

However, analysts noted the data also showed gasoline stockpiles rose due to a sharp increase in imports, against expectations for inventories to fall.

Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the lingering concerns about the world's largest consumer of crude oil.

California, meanwhile, rolled back efforts to reopen its economy, banning indoor restaurant dining in much of the state, closing bars and beefing up enforcement of social distancing and other measures.

Meanwhile, new U.S. COVID-19 cases rose by almost 50,000 on Wednesday, according to a Reuters tally, in the biggest one-day spike since the start of the pandemic.

"The overnight price action and EIA data have temporarily lifted the COVID-19 gloom that has capped oil prices all week", Halley said. United States manufacturing activity rebounded in June, hitting its highest level in more than a year as the broader economy reopened.

Optimism on Monday had been based on strong growth in USA pending home sales, bolstering belief that global fuel demand is rising steadily as major economies reopen after coronavirus lockdowns, while the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, comply with production cut commitments.

All eyes will be on driving activity in the United States over the upcoming July 4th holiday weekend and how quickly USA producers revive shut-in production, analysts said.

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