Oil prices edged lower Tuesday, declining for the second consecutive session with some traders concerned that fuel demand won’t rebound as quickly as anticipated.
U.S. crude futures for delivery in July were recently down 0.6% at $37.95 a barrel on the New York Mercantile Exchange, after dropping 3.4% Monday. The declines are pausing a weekslong recovery that powered oil to its highest level since early March. Front-month futures started the year above $60 then tumbled below $0 in late April due to a supply glut.
They have since rebounded in recent weeks with more states and countries easing coronavirus lockdowns and the Organization of the Petroleum Exporting Countries and allies like Russia curbing supply. But now that prices have recovered, some analysts expect large producers to incrementally increase output. OPEC and its partners have extended supply cuts through July, but Saudi Arabia, the de facto head of the group, said it will no longer carry out extra output curbs next month.
For June, the kingdom has cut production even more than it had agreed to under the historic OPEC agreement to buoy prices and compensate for OPEC members who aren’t complying fully with the cuts.
At the same time, some U.S. producers are ramping up output, and many analysts are worried fuel consumption will remain tepid because of lingering concerns related to the coronavirus. Plummeting demand and a production feud between Saudi Arabia and Russia earlier in the year led to a surge in global stockpiles that collapsed the market.
“The inventory overhang remains significant and uncertainty remains high for the forward supply and demand outlooks,” Goldman Sachs analysts said in a recent note.
U.S. inventories have stabilized just below an all-time high hit in 2017. An aerial view of a crude-oil storage facility in Cushing, Okla., on May 5.
Photo: johannes eisele/Agence France-Presse/Getty ImagesBrent crude futures for August delivery, the global gauge of oil prices, slid 1% to $40.40 a barrel on the Intercontinental Exchange.
Analysts were looking ahead to Wednesday figures on U.S. crude stockpiles for the latest gauge of inventories. U.S. inventories have stabilized just below an all-time high hit in 2017, while a drop in stockpiles in China has also relieved pressure on the oil market. A lack of available storage for oil led to chaos in April, pushing U.S. crude futures below $0 for the first time ever.
Still, some investors say it will be challenging for oil to rally from current levels. The number of coronavirus cases continues to climb in many parts of the world, and some analysts are wary of a second spike in cases later in the year after more swaths of the global economy reopen.
Elsewhere in commodities Tuesday, most actively traded gold futures added 1% to $1,722.30 a troy ounce, climbing for the second consecutive session. The safe-haven metal recently wobbled below a 7½-year high hit earlier in the year. Gold has been supported by lingering concerns about the economy and bets on lower interest rates but hurt by a big move by investors toward stocks and other risky assets.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
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