Oil Dips On COVID-19 Resurgence, Fears Of More Supply

OPEC raises 2020 demand forecast over China's recovery

Declining crude inventories cushion oil price fall

"Crude prices are looking very vulnerable as the coronavirus continues to spread like wildfire across Europe and trending higher in the USA", said Edward Moya, a senior market analyst at OANDA.

Futures in NY edged lower on Friday, but still managed to record an advance of 0.7 percent this week on shrinking United States crude stockpiles and signs of improving demand in China and India.

Pandemic cases have surged in the US Midwest and beyond, with new infections and hospitalisations rising to record levels in an ominous sign of a nationwide resurgence as temperatures get colder.

Crude futures in NY have clung close to the US$40-a-barrel mark since last month amid uncertainty around a demand recovery as the novel coronavirus rages.

Brent for December settlement lost 23 cents to $42.93 a barrel. In September, the panel had not seen a surplus under any scenarios it considered.

For WTI futures, the prompt spread rallied to its tightest contango in a month.

Prices pared earlier losses on Friday after American retail sales and consumer sentiment indicators topped estimates.

Crude also fell as the dollar headed towards its best week of the month.

The Organization of Petroleum Exporting Countries and its allies are facing pressure to postpone their plans for tapering output cuts. Given the uncertainty over the oil demand outlook, the right course of action is to wait for now, JPMorgan analysts including Natasha Kaneva wrote in a report. Its output had been above demand for its crude in Q1 and Q2, it said.OPEC and its allies, including Russian Federation, are in the midst of a supply accord enacted during the depths of the coronavirus market meltdown and have to decide how long to maintain their current 7.7 million b/d production cuts, which are scheduled to taper to 5.8 million b/d for 2021 through April 2022.Oil prices have wobbled around $40-$45/b since June due to the economic uncertainty over rising infection rates in many countries, and speculation is rife on whether the OPEC+ alliance will tighten its quotas.The nine-country Joint Ministerial Monitoring Committee (JMMC), co-chaired by Saudi Arabia and Russian Federation, meets monthly to recommend any changes to output levels if needed. Analysts polled by S&P Global Platts expected the EIA to report a drop of 2.3 million barrels in US supplies for the week. Companies reported no major impact on operations.

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