(Bloomberg) — Oil held losses near $41 a barrel in New York as signs of weakness in the American labor market cast doubt on the strength of its demand recovery, while U.S.-China relations deteriorated further.
The first increase in jobless claims since March comes as lawmakers negotiate another virus relief package, with infections and deaths surging across many states. Meanwhile, Beijing ordered the U.S. to close its consulate in the city of Chengdu after the American government forced China to leave its mission in Houston. Oil was still poised to eke out a second weekly gain, buoyed earlier in the week by stimulus measures agreed by European Union leaders.
Oil’s recovery from its plunge below zero has stalled, with futures stuck in a tight range since the end of June as rising infections across major economies raised doubts about a swift demand rebound. U.S. crude stockpiles are climbing and Chinese consumption is cooling, adding to the bearish headwinds.
“The market still seems to be lacking conviction on the recovery of oil demand,” said Howie Lee, an economist at Oversea Chinese Banking Corp. in Singapore. “There’s the triple threat of expiring U.S. fiscal stimulus, a second-wave contagion and intensifying conflict in U.S.-China relations, which signals the odds are stacked against a further rally for now.”
The outlook doesn’t get any better for the market. OPEC+ will start returning supply next month after historic production cuts, the physical value of prized Iraqi crude has slumped in Asia, while in Europe, Finnish refiner Neste Oyj is predicting demand for oil products will remain “severely reduced” during the third quarter due to the pandemic.
Coronavirus cases in the U.S. surpassed 4 million, doubling over a span of six weeks, while deaths in California and Florida rose to records on Thursday. Infections in Mexico, Brazil and Hong Kong also continued to climb.
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