Oil futures were headed lower on Friday as Libya fired up its energy production and as a report from the International Energy Agency cautioned that weaker demand caused by the coronavirus pandemic will linger, even if the worst of the hit to economies has subsided.
The IEA in a monthly report raised its annual forecast for crude demand to 92.1 million barrels per day, up 400,000 bpd from its outlook last month, citing a smaller-than-expected second-quarter decline as lockdowns eased in many countries.
However, the Paris-based agency said that a resurgence of cases of COVID-19 could pose problems for oil demand going foward.
The monthly report said “the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside.”
There were more than 63,000 new cases of COVID-19 in the U.S. on Thursday, setting a fresh daily record, as cases and hospitalizations in California and Texas rose, the Wall Street Journal wrote.
Meanwhile, investors also were watching the relaunch of the Messla oil field and Sarir refinery in Libya, closed since January due to civil unrest in the country.
Libya coming back on line could add more pressure to an energy market that has been attempting to find its footing amid the economic damage wrought by the coronavirus pandemic.
Some energy investors, however, have been encouraged by oil’s ability to rebound from the price lows hit back in April, even if the commodity appears to be stuck in a range of around $40 a barrel for the moment.
“The fact that we’re seeing rising support may indicate that the path higher is still looking more plausible but many downside risks still remain, including second waves and a messy end to an otherwise successful coordinated production cut.” wrote Craig Erlam, senior market analyst at Oanda, in a Friday research note.
August West Texas Intermediate crude
fell 62 cents, or 1.6%, at $39.01 a barrel on the New York Mercantile Exchange, after sliding 3.1% on Thursday to hit the lowest level for a front-month contract since June 30, according to Dow Jones Market Data.
Global benchmark Brent oil for September
lost shed 46 cents, or 1.1%, at $41.89 a barrel on the ICE Futures Europe exchange, following a 2.2% drop for its lowest finish since July 1.
For the week, WTI is facing a 3.8% weekly decline, while Brent is on track for a weekly drop of 2.2%, according to FactSet data based on the most-active contracts.