Oil Rebounds on Dollar Weakness Yet Demand Woes Linger

Crude reversed losses amid a weaker U.S. currency, easing a decline this week that’s been led by a gloomy demand outlook with virus cases surging.

Oil rose 0.9% in New York on Friday. The dollar weakened after Gilead Sciences Inc. said its Remdesivir treatment cut Covid-19 mortality risk by 62%, bolstering the appeal of commodities traded in the U.S. currency. Still, crude is on track for a 2.5% weekly decline. The coronavirus pandemic is far from easing around the world and the International Energy Agency said a jump in cases could derail the market recovery.

“Between record storage levels and the fear of further demand destruction as a result of Covid, crude oil has been under pressure all week,” said Bob Yawger, director of the futures division at Mizuho Securities USA.

The rally in crude driven by the easing of lockdowns has stalled near $40 a barrel as traders weighed the resulting acceleration of infections. California, Texas and Florida have recorded some of their biggest daily gains in cases and deaths this week. There’s a growing risk that the renewed outbreaks will impede efforts to reopen the economy.

“America is still in the throes of the pandemic and this spells bad news for the oil demand outlook,” said Stephen Brenock, an analyst at brokerage PVM Oil Associates. “Against this backdrop, upside potential for oil prices will remain in short supply.”

While the The IEA said demand should rebound sharply over the next three months as economic activity resumes, the agency also warned a flare-up of the virus, which is raging across several U.S. states and re-emerging in Asia, is “casting a shadow over the outlook.”

Supply could also become more abundant as Libya’s National Oil Corp. announced it would lift force majeure on all exports following months of near-zero shipments. The Kriti Bastion tanker has started loading 730,000 barrels of crude at Es Sider, with the cargo heading to Italy, according to port operator Waha Oil Co.