By Elizabeth Low and Alex Longley

Aug 10, 2020

(Bloomberg) Oil snapped a two-day losing streak on growing signs that consumption in key regions is edging higher.Crude demand in Asia is almost back to pre-virus levels, Saudi Aramco Chief Executive Officer Amin Nasser said Sunday. Meanwhile, oil drilling in the U.S. fell to a 15-year low and the number of active global rigs is at a record low, as explorers abandoned growth plans and as billions of barrels from old discoveries became worthless.

Oil last week broke through the top end of the range it has been stuck in for months, but it struggled to sustain that move as rising virus infections raised doubts about a sustained economic recovery. At the same time, OPEC+ is set to test the appetite for demand, returning some supply to the market from this month following historic production cuts.

“A lot of traders are still thinking of V-shaped recoveries for oil demand and the economy, but we don’t think that is going to happen,” said Paul Horsnell, head of commodities research at Standard Chartered. The market has seen “no convincing sustained break up or down and remarkably low volatility.”

Prices
West Texas Intermediate for September delivery rose 1.7% to $41.91 a barrel as of 10:24 a.m. London time Brent for October settlement gained 1.2% to $44.95

In a sign of recovering consumption, the number of commercial flights rose almost 6% from the previous week’s average in the seven days to Sunday, according to FlightRadar24 data. The average of 67,000 planes in the sky was still far below the more than 100,000 pre-Covid.

There are also still plenty of reasons to be concerned about the pace of the recovery. The 3-2-1 refining margin for combined gasoline and diesel against U.S. WTI — a rough profit gauge for processing a barrel of crude — was at its weakest level since June on Friday.