(Updates with the price move and Commerzbank/EIA reports from the first paragraph.)
Crude fell as weaker US economic data and another daily record of COVID-19 case counts undermined expectations for oil demand, outweighing a continuing decline in the rig count this week and a larger-than-anticipated drop in inventories.
West Texas Intermediate futures slipped by 0.4% to $40.60 intraday, and its international counterpart, Brent, dropped by 0.6% to $43.11.
The US reported about 77,000 new coronavirus cases in the past 24 hours, according to data compiled by the Johns Hopkins University. Colorado and Arkansas now reportedly require face coverings in public, with the Guardian saying its analysis shows the US case count is rising in 41 states. Apart from Brazil, which has the highest number of cases after the US, infections are said to be spiraling in India and Spain is reporting a resurgence.
Meanwhile, the University of Michigan's index of consumer sentiment dropped to 73.2 in July from 78.1 in June. According to data compiled by Trading Economics, market forecasts were for 79. June housing starts rose by 17% to an annual rate of 1.186 million, the Census Bureau reported Friday. Building permits increased to a 1.24 million rate from 1.22 million May. Consensus compiled by Bloomberg was for starts of 1.188 million and permits of 1.29 million.
"Risks remain on the demand side because renewed lockdowns are possible and demand may rise more slowly than anticipated as a result of changed consumer behavior," Eugen Weinberg, head of commodity research at Commerzbank, said on Friday. The Organization for Petroleum Exporting Countries (OPEC) "expressed concern" this week that a "second corona wave could destroy its efforts to rebalance the oil market."
In such a scenario, OPEC expects demand to plunge by 11 million barrels per day this year, pushing up stockpiles and that would in turn lead to continued supply surpluses in the second half, according to the Commerzbank report. Earlier this week OPEC and non-OPEC producers led by Russia agreed to lower their daily production cuts of 9.7 million barrels per day by two million barrels per day from August.
Weinberg also said the International Energy Agency, the Energy Information Administration (EIA), and the OPEC have already revised down their demand estimates for the third quarter in their latest monthly reports. They expect, on average, that demand in 2020 will be 7.5 million barrels per day lower than it was a year ago.
The EIA said in a report on Wednesday crude stockpiles slumped by 7.5 million barrels during the week that ended July 10 to 531.7 million barrels -- that compares with a market consensus for a decline of 2.1 million barrels in a Reuters' survey of analysts.
On Friday, data compiled by Baker Hughes (BKR) show the US oil rig count slipped by one to 180 during the week that ended July 17, declining for the 18th straight week to its lowest level since June 2009. The combined oil and gas rig count for the US, which stood at 793 on March 6, dropped by five to 253 last week as the number of gas rigs fell by four to 71.
In Canada, the oil rig count was unchanged for a second week at six, while the gas count climbed by six to 26 during the period under review. As a result, the aggregate count for North America increased by one to 285, compared with 1,072 a year earlier, the data show.
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