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Oil steady as rise in virus cases offsets better data

Kitco News

LONDON (Reuters) - Oil prices steadied on Monday, supported by improving economic data but held in check by sharp spikes in new coronavirus infections around the world that have forced some countries to impose partial lockdowns.

Brent crude LCOc1 fell 4 cents, or 0.1%, to $40.98 a barrel by 1031 GMT and U.S. crude CLc1 was up 7 cents, or 0.2%, at $38.56.

Crude prices found some support as profits at China’s industrial firms rose for the first time in six months in May, suggesting the country’s economic recovery is gaining traction.

The recovery of economic sentiment in the euro zone also intensified in June after a modest pick-up in May, with improvements across all sectors and a much more buoyant sense of future business, European Commission data showed.

However, fears of a second wave of the pandemic took the shine off the improving economic data.

The United States, India and Brazil are experiencing a resurgence in infections, leading authorities to partially reinstate lockdowns in what experts say could be a recurring pattern in the coming months and into 2021.

The death toll from COVID-19 surpassed half a million people on Sunday, according to a Reuters tally.

“Looking ahead, anxiety is likely to remain heightened as the epic fight against the coronavirus pandemic continues. This spells bad news for risk assets (such as oil) which will inevitably remain under pressure,” said Stephen Brennock of broker PVM.

Oil prices were also under pressure from poor refining margins and high inventories, analysts said.

(Graphic: Global Short-Term Crude Floating Storage, here)

Still, Brent is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.

U.S. and Canadian energy firms have cut the number of oil and natural gas rigs operating to a new record low even as higher oil prices prompt some producers to start drilling again.

“No massive investments are likely to be made in the foreseeable future given the gigantic mountains of debt and the considerable financial risks,” said Commerzbank analyst Eugen Weinberg.

U.S. shale oil pioneer Chesapeake Energy Corp (CHK.N) filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of the coronavirus outbreak on energy markets.

(Graphic: World’s top producers slash output, here)

Reporting by Bozorgmehr Sharafedin in London, additional reporting by Florence Tan in Singapore; Editing by Kirsten Donovan and David Clarke

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