Oil stems some losses but growing Covid-19 cases worry investors

London — Oil futures clawed back some of the losses they sustained in the previous session, but a rebound in Covid-19 cases in some countries undermined hopes for a steady recovery in global demand.

Brent crude was up 44 US cents, or 1.1%, at $40.22 a barrel by 7.52am GMT after dropping more than 5% on Tuesday to fall below $40 a barrel for the first time since June.

US crude was up 50c, or 1.4%, at $37.26 a barrel, having fallen nearly 8% in the previous session. Both major oil benchmarks are trading close to three-month lows.

The global health crisis continues to flare with coronavirus cases rising in India, the UK, Spain and several parts of the US. The outbreaks are threatening to slow a global economic recovery and reduce demand for fuels from aviation gas to diesel.

“Short-term oil market fundamentals look soft: the demand recovery is fragile, inventories and spare capacity are high, and refining margins are low,” Morgan Stanley said.

Yet, the bank raised its Brent price forecast slightly higher to $50 a barrel for the second half of 2021 with the dollar weakening and rising inflation expectations, it said.

Record supply cuts by Opec+ have helped support prices, but with grim economic figures being reported almost daily, the outlook for demand for oil remains bleak.

China’s factory gate prices fell for a seventh straight month in August although at the slowest annual pace since March, suggesting industries in the world’s second-biggest economy continued their recovery from the coronavirus-induced downturn.

Reuters