Oil Set For Weekly Drop As Virus Flare-Ups Cloud Demand Outlook
Oil held above $40 a barrel on fresh optimism that a U.S. stimulus deal is imminent, although the market is set for a weekly decline amid ongoing pandemic-driven demand concerns.
Futures in New York were little changed, after gaining 1.5% on Thursday. House Speaker Nancy Pelosi said she and Treasury Secretary Steven Mnuchin are “just about there” on a deal for a coronavirus relief package, even though Republican opposition in the Senate still poses a hurdle. Prices were also bolstered after President Vladimir Putin said that Russia’s ready to cut oil output further if needed.
Any rally in oil prices still faces resistance from the threat of virus flareups worldwide. In a troubling sign for consumption, Neste Oyj Chief Executive Officer Peter Vanacker said that oil refiners need to cut more capacity, especially in Europe, as demand drops and capacity is added elsewhere. Meanwhile, toll road use in France posted the biggest year-over-year drop last week since July, according to data from Atlantia, which operates such roads.
Putin’s comments on the planned output hikes from the Organization of Petroleum Exporting Countries and its allies come as traders are increasingly signaling the market can’t absorb the extra barrels. The group faces a decision on whether to change its output policy at a meeting scheduled for Nov. 30-Dec. 1.
Physical markets are pointing to some signs of weakness. This week, Mars Blend, a high-sulfur crude, traded at a discount to Nymex oil futures this week for the first time since May, before flipping back to a premium in recent sessions. The price differential decline comes as narrow WTI-Brent and WTI-Dubai spreads discourage interest from overseas.
Exxon Mobil Corp. plans to lay off an unspecified number of employees as low oil prices force the company to delay major projects, Chief Executive Officer Darren Woods said in an email to staff, in the latest sign of struggle among U.S. energy producers navigating the industry’s worst downturn in recent memory.