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UPDATE 4-Oil rises on expectations demand can survive new lockdowns

Tue, 22nd Sep 2020 06:04

(Updates prices, adds analyst comment)

By Bozorgmehr Sharafedin

LONDON, Sept 22 (Reuters) - Oil prices rose on Tuesday as
analysts took the view renewed lockdown restrictions would have
only a limited impact on fuel demand, partly reversing a steep
drop in prices the previous day.

Brent crude was up 54 cents, or 1.3%, to $41.98 per
barrel at 1033 GMT.

U.S. West Texas Intermediate (WTI) crude for October,
due to expire on Tuesday, rose 63 cents, or 1.6%, to $39.94.

The more active November contract was up 45 cents, or
1.1%, to $39.99.

Markets were nervous about fuel demand in countries such as
Britain, where the government will tell people to work from home
again and will impose new curbs on pubs, bars and restaurants.

"As any new restrictions will likely be more localised, the
oil demand recovery should still continue, although at a slower
pace with the easiest demand gains behind us," UBS oil analyst
Giovanni Staunovo said.

Monday's price slump was spurred by concerns of an increase
in coronavirus cases in major markets.

France saw its infections rate rising, Italy introduced more
mandatory testing, Spain asked the army for help and Germany
describe the situation as worrying.

"Losing $2 a barrel yesterday is quite a steep drop, so the
market today is adjusting the impact to a bit higher price
levels," said Bjornar Tonhaugen, Rystad Energy’s head of oil
markets.

The easing of the oil blockade in Libya also pressured
prices on Monday, but analysts expected the market to remain
undersupplied as Libyan exports were unlikely to quickly reach
the levels seen before the conflict.
"The path towards a new normal on the oil market has become
bumpier, but we still see demand topping supplies on the margin
and the surplus slowly disappearing," said Norbert Rücker,
analyst at Swiss bank Julius Baer.

Crude prices, which fell about 5% on Monday, also won some
respite as Texas refineries stayed open after a tropical storm
was expected to keep losing strength, allaying worries about
U.S. refinery demand for feedstock.

Traders are awaiting the American Petroleum Institute's data
on U.S. oil inventories due later on Tuesday.

U.S. crude oil and gasoline stockpiles likely fell last
week, while inventories of distillates, including diesel, were
seen climbing, a preliminary Reuters poll showed.
(Reporting by Bozorgmehr Sharafedin in London, additional
reporting by Sonali Paul in Melbourne and Roslan Khasawneh in
Singapore; editing by Barbara Lewis and Jason Neely)

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