(Bloomberg) -- Oil fluctuated between gains and losses in London following warnings over global energy demand and the state of the U.S. economy.
Crude in London traded near $42, swinging with global markets as a rout in stock markets eased. The outlook remains cautious though, after Federal Reserve officials said more fiscal stimulus is critical to sustain the U.S. recovery. In Europe, the head of commodity trader Mercuria Energy Group said global oil markets won’t be able to absorb OPEC+ production increases as demand is weaker than expected.
Oil has lurched lower this month amid signs a resurgence in the coronavirus could lead to more lockdown measures. Despite the concerns, the data have been mixed, with road fuel consumption in the U.K. continuing to rise over the last month. The OPEC+ alliance, meanwhile, is slowly tapering its production cuts and Libya is unleashing fresh supply as its civil war abates.
“Downside risks remain much bigger than the upside,” said Hans van Cleef, senior energy economist at ABN Amro Bank. There are “worries regarding new lockdowns now Covid-19 emerges again; worries that OPEC+ might want to increase production anyhow; worries that inventories may be built up even further.”
As supply concerns persist, the short-term outlook for demand also looks patchy. Profits from turning crude into diesel remain historically weak, and some refiners are looking to close or convert plants. Total SE said its Grandpuits refinery will become a “zero-crude platform” in the coming years, while Finland’s Neste Oyj is considering shutting one of its two domestic refineries.
Still, there are potential bright spots. Japanese refiners went on a buying spree last week, boosting the prices of some crude cargoes in the Middle East.
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