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Oil prices bounce back from 3-week lows, but economic headwinds loom

Published 07/31/2020, 10:08 AM
Updated 07/31/2020, 10:10 AM
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TOKYO, July 31 (Reuters) - Oil prices rose on Friday,
recovering further ground after touching three-week lows in the
previous session, hit by a record decline in U.S. growth as the
coronavirus ravaged the world's biggest economy and oil
consumer.
Brent crude LCOc1 was up by 40 cents, or 0.9%, at $43.34 a
barrel by 0204 GMT. On Thursday, Brent closed down 1.9% but had
recovered much of the ground lost from the lowest level since
July 10.
U.S. crude CLc1 gained 35 cents, or 0.9%, to $40.27 after
dropping 3.3% the previous session, again recovering from lows
not seen since July 10.
That leaves Brent on track for a fourth month of gains,
while U.S. crude is heading for a third consecutive month of
increases, as the contracts have recovered from the depths
reached in April when much of the world was in lockdown.
But as a second wave of infections rages around the world,
the threat to oil demand is becoming apparent.
"Despite the resilient and range-bound nature of oil pricing
over recent weeks, plateauing global demand and increasing OPEC+
output raises the question of whether the market can absorb
additional barrels," RBC Capital Markets said in a note.
OPEC+, a grouping of the Organization of the Petroleum
Exporting Countries (OPEC) and its allies, collectively plan to
increase production from Saturday, adding about 1.5 million
barrels per day to global supply. Globally, the economic outlook has dimmed again, with
increasing coronavirus infections raising the risk of renewed
lockdowns and threatening any rebound, according to Reuters
polls of over 500 economists globally. That was underlined by Thursday's news that U.S. gross
domestic product collapsed at a 32.9% annualised rate, the
deepest decline in output since records began in 1947.

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