Oil Climbs with Demand Back in Focus

(Bloomberg) -- Oil rose above $43 a barrel in New York with focus returning to the fragile demand recovery after the hurricane threat eased.

Futures added 0.8% in New York amid a broader rally in equities, snapping a two-day decline. Chinese economic activity continued to rebound in August as the world’s second-largest economy emerges from the virus slump. Meanwhile, U.S. Gulf Coast refineries started the recovery process after Hurricane Laura passed, with facilities in southeast Texas avoided the worst of the storm.

Oil is poised for a fourth monthly advance but prices are firmly anchored near $43 a barrel and struggling to push further as nations across the globe battle to contain the virus. The market is also contending with more supply from OPEC+ after the group started easing its historic output cuts, while signs emerged that Chinese crude purchases are starting to slow.

Laura was one of the most powerful hurricanes to ever hit Louisiana and U.S. Gulf Coast refiners halted around a third of gasoline and diesel production as the storm approached, but the market impact was relatively muted. Futures in New York started the week at $42.48 a barrel and ended it close to $43.

“Oil still looks positive, but it’s going to grind higher rather than race because there’s still concerns regarding the consumption side of the equation,” said Jeffrey Halley a senior market analyst for Asia Pacific at Oanda. “Whichever countries opened up, Covid-19 has made a return.”

Prices

West Texas Intermediate for October delivery added 35 cents to $43.32 a barrel on the New York Mercantile Exchange as of 8:21 a.m. London time after falling 1% in the previous two sessions Futures are up almost 8% this month The one-month timespread has been in a contango above 30 cents for most of the month, signaling concerns about over-supply Brent for November settlement gained 1.2% to $46.34 on the ICE Futures Europe exchange after rising 0.5% on Friday The contract is up almost 6% this month

A gauge of the services industry in China was at the strongest level since early 2018 while the expansion in manufacturing activity slowed slightly. The non-manufacturing gauge rose to 55.2 from July’s 54.2, the National Bureau of Statistics said Monday.

Re-balancing of the oil market has slowed sharply after demand stalled due to the spreading virus and as some shut-in crude output restarted, according to a report from Goldman Sachs Group Inc. dated Aug. 30. Still, Brent prices may rally to $64 a barrel by the third quarter next year as vaccines become widely available, helping to support global growth and oil consumption.

Meanwhile, U.S. explorers returned to parking more rigs last week as stagnant prices pushes the industry to curtail activity. The number of active machines fell by three to 180, according to Baker Hughes Co. data released Friday.

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