(Bloomberg) -- Oil edged up with support from U.S. equities, but pandemic-driven demand concerns capped the price rebound.
Crude futures in New York managed to close 0.5% higher on Monday, boosted by a stronger equity market. Still, the coronavirus is raging around the globe -- infections flared by a record in Hong Kong, Los Angeles is on the brink of another stay-at-home order and the new rate of people testing positive for the first time in Florida climbed to nearly 15%.
“The rising infection rates are adding doubt to the idea that demand is going to recover uninterrupted,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. “This virus in no way is done, but continues to be a big issue.”
Crude has been stuck in a holding pattern this month as a resurgence in coronavirus cases in various parts of the world proves demand weakness is here to stay for the near-term. Global virus cases are approaching nearly 15 million. Signals that U.S. companies may start ramping up shale production as the OPEC+ alliance prepares to unleash crude back onto the market next month are also adding to the negative sentiment.
Market participants are also awaiting the next clear signal as to whether American crude inventories, which are sitting at the highest seasonal level in decades, will continue to trend upward.
“What the market really needs to see is, are we at the worst of the inventory problem? Or are we just going to see a continued rise in stockpiles?” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “Right now, you’re really not seeing much of anything in either direction.”
See also: OPEC Has New Competitor as China Ships Oil From Swelling Storage
In a further warning sign for the oil market, Chinese demand is cooling off. A rebound in consumption in the Asian giant helped drive crude higher, but the price of physical oil barrels traded in Asia has slipped with the the country’s buying spree slowing in recent weeks.
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