By Geoffrey Smith
Investing.com -- Crude oil prices staged a partial recovery in early trade in New York on Friday, after falling earlier in response to a warning that the spread of the coronavirus across the U.S. and many emerging markets is "casting a shadow" over the global economic recovery.
By 9:15 AM ET (1315 GMT), U.S. crude futures were down 0.1% at $39.60 a barrel, having earlier hit a two-week low of $38.54 on the release of the International Energy Agency's monthly report. The international benchmark Brent was effectively flat at $42.32 a barrel, up $1 from its intraday low.
RBOB gasoline futures, which had also fallen overnight, rebounded to be up 2.0% at $1.2645 a gallon.
In its report, the IEA had warned that "the strong growth of new Covid-19 cases that has seen the re-imposition of lockdowns in some regions, including North and Latin America, is casting a shadow over the outlook."
"While the oil market has undoubtedly made progress since “Black April”, the large, and in some countries, accelerating number of Covid-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside," the agency said.
Despite that, it revised up its forecast for average demand this year by some 400,000 barrels a day to 92.1 million b/d, having concluded that the drop in demand in the second quarter was not as acute as it first thought.
The IEA now expects demand to decline by 7.9 million b/d in 2020 and recover by 5.3 million b/d in 2021.
The turnaround intraday owed much to a positive reaction from equities to news suggesting that the search for a vaccine against Covid-19 is progressing at an unprecedented speed. However, it was also supported at the margin by sustained increases in other industrial commodity prices this week, driven by restocking in China. Wire reports suggested that Chinese state-owned refiners intended to hike their prices for fuel at the weekend.
Supply, too, is tending upward. Libya lifted the claim of force majeure regarding shipments from all its export terminals on Friday, newswires reported. However, it's still unclear how much oil the country can produce given its ongoing civil war. The IEA noted that Libyan supply could increase by as much as 900,000 b/d by the end of the year if the fighting eases off.