Oil is up on economic recovery hopes and Covid-19 treatment

London — Oil rose on Wednesday on hopes for an economic recovery and for a clinical trial showing a cheap steroid could help save some critically ill coronavirus patients, but fears of a second wave of the virus curbed gains.

Brent crude was up 29c, or 0.7%, at $41.25 a barrel at 8.25am GMT. US West Texas Intermediate (WTI) rose 17c, or 0.4%, to $38.55 a barrel.

The World Health Organisation (WHO) said it is updating its guidelines after results showed the corticosteroid dexamethasone cut death rates by about a third among the most severely ill Covid-19 patients.

Yet concerns persist about the spread of the virus in some regions and the risk of second waves where the spread is slowing.

“We think the oil market is not currently pricing in a significant probability of either second waves of coronavirus cases in key consumers and the associated lockdowns, or anything less than a rapid return to economic business as usual,” Standard Chartered analysts said, pointing to a downside risk for prices in the medium term.

Beijing has ramped up efforts to contain the coronavirus outbreak that has fanned fears of wider contagion, and scores of flights to and from the Chinese capital were cancelled and schools shut.

Both benchmarks rose more than 3% on Tuesday, after the International Energy Agency (IEA) raised its 2020 oil demand forecast to 91.7-million barrels per day (bpd) and US retail sales posted a record jump in May.

The rise in US crude and fuel inventories, however, stoked concerns about a surplus and pressured oil prices, as the number of coronavirus infections surpassed 8-million globally and several US states saw a spike in new cases.

Official data from the US department of energy’s Energy Information Administration (EIA) is due on Wednesday.

A panel led by oil cartel Opec will meet on Thursday to further discuss ways to strengthen and review compliance with producers’ output cut promises. Iraq has reduced its oil exports by 8%, or 300,000 bpd, so far in June, according to shipping data and industry sources, indicating Opec’s second-largest producer is stepping up efforts to adhere to its pledges.

Reuters