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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.

Scoop: Biden weighs retired general Lloyd Austin for Pentagon chief

Lloyd Austin testifying before Congress in 2015. Photo: Chip Somodevilla/Getty Images

Joe Biden is considering retired four-star general Lloyd Austin as his nominee for Defense secretary, adding him to a shortlist that includes Jeh Johnson, Tammy Duckworth and Michele Flournoy, two sources with direct knowledge of the decision-making tell Axios.

Why it matters: A nominee for Pentagon chief was noticeably absent when the president-elect rolled out his national security team Tuesday. Flournoy had been widely seen as the likely pick, but Axios is told other factors — race, experience, Biden's comfort level — have come into play.

Updated 22 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: WHO: AstraZeneca vaccine must be evaluated on "more than a press release."
  2. Politics: Supreme Court backs religious groups on New York COVID restrictions.
  3. World: Thailand, Philippines sign deal with AstraZeneca for vaccine.
  4. Economy: Safety nets to disappear in December Black Friday shopping across the U.S., in photosAmazon hires 1,400 workers a day throughout pandemic.
  5. Education: National standardized tests delayed until 2022.