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Oil posted a gain last month, boosted by a steadily weakening US dollar and OPEC’s restraint on production.Deep crude output curbs by the OPEC and its allies have helped futures rebound from their plunge below zero in April, yet the unprecedented cuts are set to ease in a matter of days.
On Friday, crude oil recovered from an overnight slump, with Brent crude for August delivery rising 0.84 percent to 43.52 a barrel, an increase of 0.42 percent from a week earlier. West Texas intermediate for July delivery added 0.88 percent to US$40.27 per barrel, but dropped 2.28 percent for the week.
Still, US crude inventories have showed signs of shrinking and are sitting at the lowest since April. The Bloomberg Dollar Spot Index is also set for its worst monthly performance since January 2018, bolstering the appeal of commodities traded in the US currency.
“There was a pretty significant drop in crude oil inventory and OPEC and some of the refiners are doing a good job of rebalancing the market,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. “The decline in the dollar has also helped support crude oil.”
Yet, futures have remained trapped in a tight trading range with rallies limited by the COVID-19 pandemic ravaging demand.Exxon Mobil Corp said that it only sees an oil consumption recovery well into next year.
Adding to troubling signs over an economic recovery, US consumer sentiment extended its slide late last month as the virus led to renewed business closings and layoffs. Exxon and Chevron Corp posted the worst losses in a generation as the virus, combined with a global crude glut, battered their businesses.
Meanwhile, US shale producers are also saying that supply is likely to come roaring back over the next few months with futures near US$40 a barrel.ConocoPhillips this week said that by September it would restart most wells that were shut.
“The big worry is that we’re about to go into August and this is the last two weeks or so of potential driving vacations,” said Bill O’Grady, executive vice president at Confluence Investment Management in St Louis, Missouri. “You’ve had depressed demand for gasoline and it’s probably not going to get a whole lot better from here.”
OPEC+ plans to return about 1.5 million barrels a day to the market next month after cutting global supply by about 10 percent when demand plunged.