By Geoffrey Smith
Investing.com -- Crude oil prices drifted lower in early trade in New York on Monday, in a holding pattern ahead of what promises to be a pivotal week for the outlook for U.S. fuel demand.
By 10:20 AM ET (1420 GMT), the benchmark U.S. crude marker was down 1.0% at $40.34 a barrel, while its international counterpart Brent was down 1.0% at $43.72.
Both blends remain under pressure amid signs that the rebound in the world economy is repeatedly being interrupted by local flare-ups of the coronavirus, not to mention the more generalized spread of Covid-19 in the U.S. Gasoline RBOB Futures, meanwhile, were also lower but rangebound, down 0.9% at $1.2135 a gallon.
The mayor of Los Angeles threatened over the weekend that the U.S.’s second-biggest city is “on the brink” of fresh stay-at-home orders that would put a sizable dent in U.S. demand if enacted. On the brighter side, New York City progressed to the fourth stage of reopening on Monday, while the World Health Organization said the outbreak in Brazil – the second-worst in the world after the U.S. – had plateaued and was no longer exponential.
Morning trading in the U.S. was dominated by corporate news, with Chevron (NYSE:CVX) snapping up shale play Noble Energy (NASDAQ:NBL) for just under $5 billion plus another $8 billion in debt, a consolidation move that’s likely to be typical of the playbook for the next few months.
More eye-catchingl, Denbury Resources (NYSE:DNR), another shale player, was forced to deny issuing a statement that it had received a buyout offer some five times above the current market price. A press release alleging such an offer had been fraudulently issued some hours earlier.
Denbury had missed an $8 million coupon payment on its bonds at the end of June, raising speculation that it may be forced to seek chapter 11 bankruptcy protection.
The strain on the U.S. upstream sector was also visible over the weekend in the news that Baker Hughes's rig count fell to another multi-year low, disappointing hopes for a first weekly increase since February.
Elsewhere, Bloomberg reported that the refineries of China’s Sinopec (NYSE:SHI) would cut refining runs in response to flooding that devastated one of China’s biggest oil producing regions last week. The move suggests end demand isn’t robust enough to justify paying a near-term premium for feedstock to cover the disruption to supplies.