Oil falls as crews return to U.S. Gulf rigs, economic recovery stalls

Brent crude futures gained 5 cents, or 0.1%, to $42.27 a barrel

  
Oil Refinery. Image used for illustrative purpose.

Oil Refinery. Image used for illustrative purpose.

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MELBOURNE: Oil prices fell on Thursday as U.S. producers in the Gulf of Mexico prepared to resume output following Hurricane Sally, and amid concerns about the slow economic recovery from the COVID-19 pandemic as U.S. jobless claims remained high.

Brent crude was down 24 cents, or 0.6%, to $41.98 a barrel at 1344 GMT, and U.S. West Texas Intermediate (WTI) crude fell 36 cents, or 0.9%, to $39.80 a barrel.

Both contracts rose more than 4% on Wednesday.

U.S. energy companies were starting to return crews to offshore oil platforms in the Gulf of Mexico after Hurricane Sally halted operations for five days, shutting down nearly 500,000 barrels per day (bpd) of output.

"As producers prepare to resume production, oil prices are retreating from yesterday’s price spike," said oil broker PVM's Tamas Varga.

An OPEC+ technical panel warned that a rise in coronavirus cases in some countries may curb oil demand despite signs of economic recovery and initial indications of a decline in oil stocks, according to an internal document seen by Reuters. 

Global coronavirus cases are expected to pass 30 million on Thursday, according to a Reuters tally. 

OPEC and allies led by Russia, a group known as OPEC+, pressed on Thursday for better compliance with their agreed oil output cuts against the backdrop of falling prices. 

"Mission is far from accomplished by OPEC+ and the need for deeper cuts or reining in sub-compliers to avoid global stock builds returning is overarching," said Rystad Energy’s head of oil markets Bjornar Tonhaugen.

"The market is fully aware of the strenuous situation in the short term, hence sending prices a bit down today," he added.

Prices were also under pressure from the slow economic recovery from the pandemic.

The Labor Department's report showed the number of Americans filing new claims for unemployment benefits fell last week, but remained at extremely high levels as the labor market recovery shifts into low gear and consumer spending cools. (Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne and Roslan Khasawneh in Singapore; Editing by Emelia Sithole-Matarise and Mark Potter) ((bozorgmehr.sharafedin@thomsonreuters.com;))

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