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Illustration: Aïda Amer/Axios

Oil prices are recovering as producers slash output and demand starts coming back, but analysts warn there's a big asterisk next to the trend: the trajectory of the coronavirus pandemic.

Driving the news: Brent crude is trading around $31.97 this morning compared to its April trough below $20, while prices for the U.S. benchmark WTI have roughly doubled over the last two weeks to around $28.62.

Where it stands: "Market forces have aligned producers around the world to support fundamentals, and demand is increasingly showing signs of having troughed," Barclays says in a note this morning.

  • But it adds: "Prices are likely to remain under pressure over the very short term, especially amid significant uncertainties regarding the pace of recovery in the broader economy."

Threat level: But prices remain very low, and it will be a long road back as a huge glut is burned off and the global economy remains deeply wounded.

  • And here's the thing: The market's recovery could unravel if easing restrictions creates a surge in new infections, analysts warn.

What they're saying: "We believe stocks will be reduced gradually over the next 12 months or so. All bets though hinge upon avoiding a second wave of the coronavirus, which is yet to be seen as countries remove lockdowns around the world," Rystad Energy's Bjørnar Tonhaugen writes in a note this morning.

  • Vandana Hari of Vanda Insights tells Bloomberg: “Market sentiment has turned cautiously constructive since the end of April and I expect it to remain as such unless there are major setbacks in terms of infection rates.”

Threat level: A lot of the impact of the collapse is too late to avoid — both for the industry and beyond.

  • This year's downturn in oil markets is likely to create a substantial drag on the wider U.S. economy as energy companies slash spending, Dallas Fed economists say in a new analysis.

Why it matters: It shows how the U.S. production boom over the last decade-plus has raised the economic stakes when the industry thrives — or takes a gigantic hit, which is happening now as the sector sheds jobs and cuts spending.

What they found: "The decline in oil and gas capital expenditures will be a major drag on U.S. business fixed investment in second quarter 2020," the report states, noting this investment is an important part of GDP.

  • "We estimate that investment declines in the energy sector alone may lead to a 6.1-percentage-point decline in U.S. fixed investment in the second quarter," it finds (emphasis added).

Go deeper: How oil's collapse will weigh on the U.S. economy

Go deeper

New turbulence for airlines

Illustration: Sarah Grillo/Axios

The peak leisure travel season — such as it is — is almost over, and without conferences or events to woo business travelers this fall, the airline industry's modest recovery could quickly lose altitude.

Why it matters: Investors have been snapping up airlines as bargain stocks lately — encouraged, in part, by reports of potential progress toward a coronavirus vaccine that could boost depressed air travel.

National Guard chief says it took 3 hours for Pentagon to grant Jan. 6 request

Photo: Stefani Reynolds/Bloomberg via Getty Images

William Walker, commanding general of the D.C. National Guard, will testify Wednesday that it took three hours and 19 minutes for Pentagon leadership to approve a request for National Guard assistance during the Jan. 6 Capitol attack, according to his prepared remarks.

Why it matters: The timeline over when National Guard requests were made and granted has been a key point of contention in congressional hearings examining the security failures surrounding the Capitol riots.

26 mins ago - World

International Criminal Court opens Israel-Palestine war crimes probe

Israeli Prime Minister Benjamin Netnayahu has strongly objected to the investigation. Photo: Lior Mizrahi/Getty Images

International Criminal Court (ICC) prosecutor Fatou Bensouda on Wednesday announced her intention to open an investigation into crimes allegedly committed in the Palestinian territories since 2014.

Why it matters: The investigation is expected to consider possible war crimes by Israel and Hamas during the 2014 war in Gaza, as well as the construction of West Bank settlements by Israel. It could sharply increase tensions between Israel, which fiercely opposes the probe, and Palestinian leaders, who requested it.