By Adedapo Adesanya
Oil spiked and hit a five-month high based on larger than expected inventory draw this week, but fears of a second wave of COVID-19 have caused crude prices to retreat, dropping by 1 per cent on Friday.
The Brent crude futures fell 45 cents or 1 per cent to trade at $44.64 per barrel and US West Texas Intermediate (WTI) crude futures dropped 42 cents or 1 per cent to $40.81 per barrel.
The rise in infections remains the dominant issue for the fuel demand outlook but this did not stop both benchmarks from marking another weekly gain, of more than two per cent.
Despite getting some support, investors remained concerned about rising COVID-19 cases globally.
Cases in the United States are still rising in a number of states, while India recently reported a record daily jump in infections. More than 700,000 people have died in the worldwide pandemic.
Even as prices rallied on stronger data from the Energy Information Administration (EIA), the market narrative remained the same, weak demand amid some fear of oversupply has continued to erase whatever gains the market delivers.
Even as Iraq pledged to cut output further in August, which helped support prices, it has proven to be a short term helper and has proved that demand is a bigger worry.
The nation has been a laggard in fully meeting its pledge as part of an April deal by the Organisation of the Petroleum Exporting Countries (OPEC) to reduce supply but it hopes to make amends by cutting 400,000 per barrels daily in August and September.
Also, halt in talks between US lawmakers over another round of stimulus contributed to the outlook of the market with President Donald Trump threatening to pull White House representatives out of talks and instead issue executive orders to address economic needs.
The inability for the US Congress to come up with a plan for the next round of stimulus is creating doubt for US economic recovery, something investors are wary about.
Meanwhile, US energy companies cut the number of oil and natural gas rigs this week to a record low for the 14th week. US oil rigs fell by four to 176 this week, their lowest since July 2005.
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