By Geoffrey Smith
Investing.com -- Crude oil prices were on autopilot to drift into the weekend in early trade on Friday, with the market having digested the updated outlook for the supply situation for the next months and still largely untroubled by clouds over the outlook for demand.
By 9:15 AM ET (1315 GMT), U.S. crude futures were up 0.3% at $40.87 a barrel, while the international benchmark Brent was effectively unchanged at $43.35.
Gasoline RBOB Futures, by contrast, were down 1.1% at their lowest in two weeks after another round of headlines documenting the spread of the coronavirus further dampened the prospects for fuel demand.
According to Petroleum Argus, crack spreads for gasoline are currently trading at around $3 a barrel, well below the $10/bbl usual for the summer tourist season.
The chance of that improving much in the near term looks limited. The U.S. posted a new one-day high of over 77,000 new Covid-19 cases on Thursday, while the daily death toll rose to 977, its highest since early June. Against such a backdrop, the reopening of the U.S. economy that has driven the rebound in fuel demand is looking increasingly precarious, analysts warn.
“#Oil increasingly at risk of a correction with the recovery in global demand showing signs of losing momentum,” Saxo Bank’s Ole Hansen said via Twitter on Friday. He noted that the restoration of 2 million barrels a day of supply to the world market from August is “colliding with multiple failures to curb the #COVID19 pandemic.”
Those failures range from Brazil, which now has over 2 million confirmed cases, to Japan, where the capital Tokyo has witnessed a flare up in infections due to a loss of discipline in observing social distancing.
According to the Petroleum Association of Japan, gasoline demand had nearly recovered to pre-Covid levels in June, being down only 7% on the year. By contrast, it noted, jetfuel demand was down by more than 70%.
The market will have half an eye on Baker Hughes’ rig count data for the week. An S&P Global (NYSE:SPGI) Platts poll published earlier suggested that the number of active rigs may actually increase for the first time in four months.