(Bloomberg) -- Oil clawed back some lost ground in Asia, but is set for a weekly decline after data showed the U.S. economy had its worst contraction on record and the coronavirus pandemic continues to cloud the outlook for a demand recovery.
Futures in New York rose as much as 1.6%, following a 3.3% drop on Thursday. The U.S. economy suffered its sharpest downturn since at least the 1940s in the second quarter, pointing to how coronavirus has devastated businesses across the country. The number of Americans filing for unemployment benefits increased for a second straight week, while Germany’s economy shrank the most in at least half a century in the second quarter.
U.S. crude is down about 2% over the week, but remains on track to eke out a modest gain for July. The market’s rally from April’s price collapse into negative territory has stalled around $40 a barrel amid signs of a resurgence of the virus across parts of the U.S. and now Europe. Royal Dutch Shell (LON:RDSa) Plc Chief Executive Officer Ben van Beurden said oil demand may not see a full recovery until next year.
On the supply side, the OPEC+ alliance is days away from unleashing crude back onto the market following historic output cuts, and in the U.S., ConocoPhillips (NYSE:COP) is the latest explorer to announce it’s bringing back oil production after prices recovered from historic lows. Shale producers Continental Resources (NYSE:CLR) Inc., Parsley Energy (NYSE:PE) Inc. and EOG Resources Inc (NYSE:EOG). have said they would restore some curtailed output in July.
For the first time since the oil price recovery started three months ago, Saudi Arabia and other top Middle East producers are coming under heavy pressure to cut the price of their barrels, a sign of how the rally has begun to stall.
The secretive oil-trading businesses of Shell and Total SE saved both European majors from posting losses in the second quarter, bringing a torrent of cash that countered the impact of the coronavirus crisis.
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