Oil boosted by OPEC+ cuts even as virus weighs on market
- Market pulls lower after Boston Fed Chair comments.
- Brent earlier touched $42.92, highest since June 8.
- Brent backwardation suggests tightening prompt supply.
- US oil and gas rigs hit record low for 7th week -Baker Hughes.
NEW YORK: Oil prices rose on Friday but pulled back sharply from early highs on concerns that continued spread of the novel coronavirus could stall the United States' economic rebound.
Crude benchmarks followed other assets lower, pulling back from session highs after Boston Federal Reserve President Eric Rosengren said more fiscal and monetary support for the US economy will likely be needed.
Rosengren repeated his view that the US unemployment rate will likely be "at double-digit levels" at the end of 2020 and cautioned against reopening the economy too quickly after the end of lockdowns aimed at containing the virus.
Heightening fears, Apple announced that it would re-close certain stores as the virus spread further.
"It's spooked everyone in North and South Carolina," said John Kilduff, partner at energy hedge fund Again Capital in New York.
Brent crude rose 61 cents to $42.12 a barrel by 1:26 p.m. EDT (1726 GMT), after trading up to $42.92 a barrel and then briefly turning negative. US crude was 75 cents higher at $39.53 a barrel, after earlier touching $40.49.
US crude is up 9.2% so far this week, while Brent is up 9%.
The highs early in the session came after Iraq and Kazakhstan, during a meeting of an OPEC+ panel on Thursday, pledged to comply better with oil cuts, sources said. This means curbs by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, could deepen in July.
In a further sign of market recovery, Brent on Thursday moved into backwardation, where oil for immediate delivery costs more than supply later, for the first time since March.
A premium for oil for immediate delivery usually indicates tightening supply and encourages storage to be drawn down.
US crude stockpiles hit another record this week, but fuel inventories fell.
The US oil and gas rig count, an early indicator of future output, fell to a record low for a seventh week in a row, dropping by 13 to 266 this week, according to data from energy services firm Baker Hughes Co going back to 1940.
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