Oil above $42 as possible OPEC+ cut extension offsets demand concern

FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

By Alex Lawler

LONDON (Reuters) – Oil steadied above $42 a barrel on Friday, heading for a weekly drop, as demand concerns raised by surging coronavirus cases in the United States and Europe were offset by the prospect of an extension to OPEC-led supply curbs.

Several U.S. states reported record daily increases in infections on Thursday, while France extended curfews for about two thirds of its population as the second wave of the COVID-19 pandemic sweeps across Europe.

Brent crude <LCOc1> rose 2 cents to $42.48 a barrel by 1335 GMT, having gained 1.7% on Thursday. U.S. crude <CLc1> added 8 cents, or 0.2%, to $40.72. Both contracts are heading for a weekly loss.

“There is little in the way of support from the demand side in view of the extremely high number of new COVID-19 cases,” said Commerzbank analyst Eugen Weinberg. “There is also pressure on prices from the supply side.”

Libyan output, which had been mostly offline since January, has reached 500,000 barrels per day (bpd) and will rise further by the end of October.

Oil gained some support from comments by Russian President Vladimir Putin on Thursday that Moscow did not rule out extending OPEC+ oil output cuts.

“The only bullish piece of news comes from Russia,” said Bjornar Tonhaugen of Rystad Energy.

OPEC+, a group that includes Russia and the Organization of the Petroleum Exporting Countries (OPEC), is due to increase production by 2 million bpd in January 2021 as part of a plan to pump more as demand recovers.

However, the second wave of the pandemic and resulting slowdown in the demand recovery have raised the question of whether the increase is premature.

OPEC+ made a record supply cut from May, which boosted prices from historic lows. Brent is up from a 21-year low below $16 in April.

(Additional reporting by Aaron Sheldrick; Editing by Alex Richardson and David Goodman)

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