NEW YORK: Oil prices edged higher in a volatile session on Thursday, finding support from signs of a marginal improvement in the US economy but rising cases of COVID-19 in some states capped gains.
Brent crude rose 24 cents, or 0.6 per cent, to $40.55 by 11:14 a.m. ET (1514 GMT), after trading as low as $39.47. The global benchmark dropped 5.4 per cent on Wednesday. US West Texas Intermediate (WTI) crude rose 22 cents, or 0.6 per cent, to $38.23.
Oil found some support after declining earlier as the number of Americans filing claims for unemployment benefits fell last week and orders for key capital goods rebounded in May.
Still, the decline in jobless claims was less than analysts expected and other data support economists’ expectations that GDP could shrink at as much as a 40 per cent annualized rate in the second quarter.
To kick-start the world economy devastated by coronavirus, central banks have delved deep into their toolboxes and unleashed trillions of dollars in stimulus.
“Part of the rebound here is the idea that all the stimulus measures that central banks and the world’s governments are pumping into the economy is gonna have a positive impact on economic activity and that it will be supportive to demand,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
“The only roadblock is if the number of COVID-19 cases picks up and we have to reimpose shelter in place measures but I don’t think we can conclude that it’s on the cards yet.” New infections have surged in US states including California, Texas and Florida, while Australia posted its biggest daily rise in cases in two months.
“Despite the recent increase in the COVID-19 infection rate across large regions throughout the US, our real time geolocation data has, to this point, not suggested a material change in broad societal behavior as vehicle traffic continues to improve, international flights re-gain ground, employees phase back to work and discretionary activity picks up,” said Michael Tran, managing director of energy strategy at RBC Capital Markets in New York.
Still, the International Monetary Fund’s prediction on Wednesday of a deeper global recession than previously thought has added to market concerns of weakened oil demand.
A record supply cut by the Organization of the Petroleum Exporting Countries and allies has supported the oil market, which is much stronger compared with April, when Brent hit a 21-year low below $16 a barrel and US crude turned negative. Investors are waiting to see if the producers, known as OPEC+, extend their record cut beyond July.