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UPDATE 2-Oil rises further from 3-week lows, but headwinds loom

Fri, 31st Jul 2020 05:12

(Updates prices, adds Japan oil import data)

By Aaron Sheldrick

TOKYO, July 31 (Reuters) - Oil prices rose on Friday, after
touching three-week lows in the previous session, responding to
a record decline in U.S. growth as the coronavirus ravaged the
world's biggest economy and oil consumer.

Brent crude was up by 41 cents, or 1%, at $43.35 a
barrel by 0702 GMT. On Thursday, Brent closed down 1.9% after
touching its lowest level since July 10.

U.S. crude gained 43 cents, or 1.1%, to $40.35 after
dropping 3.3% the previous session, also off lows not seen since
July 10.

Brent is on track for a fourth month of gains, while U.S.
crude is heading for a third, as both rise from depths hit in
April when much of the world was in lockdown.

A resurgence and spread of infections around the world,
however, underscore the sustained threat to oil demand.

"The equilibrium price may be lower," said Michael McCarthy,
chief strategist at CMC Markets. "Now that we have dealt with
the issues around the OPEC+ grouping, we know what's happening
there, the key issue for oil markets is demand destruction."

OPEC+, a grouping of the Organization of the Petroleum
Exporting Countries (OPEC) and its allies, plans to increase
production from Saturday, adding about 1.5 million barrels per
day to global supply.

Globally, the economic outlook has dimmed again, with
increasing coronavirus infections raising the risk of renewed
lockdowns and threatening any rebound, according to Reuters
polls of over 500 economists.

That was underlined by news on Thursday news that U.S. gross
domestic product collapsed at a 32.9% annualised rate, the
deepest decline in output since records began in 1947.

In Germany, there was also a record decline in output, with
Europe's largest economy contracting by 10.1% quarter on quarter
from April to June.

Japan's oil imports fell by more than 30% in June to around
1.9 million bpd, while product sales were down 10%, industry
ministry data showed on Friday.

(Reporting by Aaron Sheldrick; editing by Shri Navaratnam and
Jason Neely)

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