An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia.
Simon Dawson | Bloomberg | Getty Images
Oil was little changed on Friday and headed for a first weekly fall since April as new U.S. coronavirus cases spiked, stoking fears of a second wave of the virus hitting fuel demand.
The oil benchmarks were heading for weekly declines of around 8%, their first after six weeks of gains that have lifted prices off April lows.
Fears that the coronavirus pandemic may be far from over has brought the rally to a halt, with about half a dozen U.S. states reporting spikes in new infections.
“We definitely have an explosion of cases in areas that were not really affected before,” said Bob Yawger, director of energy futures at Mizuho. “That ultimately leads to less people driving, less demand for gasoline.”
At the same time, U.S. crude oil inventories have risen to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.
The build happened despite producers from the United States, and the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, cutting supply.
The number of crude oil drilling rigs in the United States, an indicator of future supply, fell by seven to 199 this week, data from oil services firm Baker Hughes showed.
OPEC+ slashed supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand, and agreed last weekend to extend the reduction.
“While a bullish argument can still be made as production continues to decline with demand still showing improvement, we look for the down trend in output to begin slowing appreciably while demand recovery could be downsized if the coronavirus continues to ramp up,” said Jim Ritterbusch of Ritterbusch and Associates.