The oil market's recovery from the depths of the pandemic-fueled collapse has gone into reverse lately.
Driving the news: Prices stalled in the low $40s per barrel for the U.S. benchmark WTI several months ago and have been losing ground in recent days.
- WTI and Brent crude, the global benchmark, are both trading at their lowest levels in over two months this morning.
- U.S. prices had slid to $37.45 as we hit publish Tuesday morning, with Brent at $40.46.
Why it matters: They're too low for many producers to profitably drill new wells and ease financial stress, and more bankruptcies are likely.
- Indebted U.S. shale producers and their contractors are especially exposed.
- More broadly, prices shows the tragic global persistence of COVID-19, which has slashed demand for oil, although it is come back a lot from earlier in the year.
The big picture: Analysts say COVID-19 and other forces — including U.S.-China trade tensions and higher OPEC+ supply — are together putting downward pressure on prices as summer winds down.
- "The streak of losses is driven by a stalling crude demand outlook for the rest of the year, with rising cases of COVID-19 and the end of the summer driving season in the US, as well as Asian refineries putting on breaks," Rystad Energy analyst Paola Rodríguez-Masiu said in a note this morning.
Yes, but: Norbert Ruecker of the Swiss bank Julius Baer tells Reuters that the market's macro conditions favor a return to recovery.
- “Fundamentally, things have not changed,” he said. “Demand is recovering, supply remains constrained, and the storage overhang is slowly disappearing.”
Go deeper: COVID-19 remains oil price’s wild card (FT)