WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed earlier losses to end the Friday session sharply higher along with surging equities after potential coronavirus treatment remdesivir showed positive results in late-stage clinical trials as infections in the United States hit new record highs this week.
Gilead Science said Friday its highly publicized drug, remdesivir, showed a 62% reduction in mortality rates for COVID-19 patients during the Phase III study, spurring hopes virus-related fatalities could remain low even as the pandemic sweeps through the U.S. The study results were released at a time when markets were growing increasingly worried about the uncontrolled spread of the virus across southwestern states and its impact on the economic recovery. Florida, California and Texas reported Friday an alarming uptick in virus-related deaths following massive spikes in new infections just a couple of weeks ago.
Investors are closely watching for new demand indications in COVID-19 hotspots, with mobility data suggesting consumers have begun to scale back driving and spending. U.S. coronavirus infections climbed by 60,500 new cases on Thursday, according to Centers of Disease Control, the highest single day increase of any country since the outbreak first began in early January.
Shortly after the study was released, the Dow Jones Industrial charged higher over 300 points and S&P 500 climbed 0.7%, pushing other risk assets higher. The U.S. dollar edged 0.5% lower to end a volatile week of trading at 96.610 against the basket of global currencies.
NYMEX West Texas Intermediate August futures jumped $0.93 to settle at $40.55 barrel (bbl) after trading as low as $38.54 bbl earlier in the session and the international benchmark Brent crude clawed back $0.89 to settle above $43 bbl. NYMEX ULSD August futures gained 1.73 cents to $1.2412 gallon and front-month RBOB futures surged 3.26 cents or 3% to $1.2831 gallon.
Separately, the International Energy Agency boosted its 2020 demand forecast by 400,000 barrels per day (bpd) to 92.1 million bpd in its latest Oil Market Report released Friday morning, citing faster-than-expected economic recovery in countries part of the Organization of Economic Cooperation and Development. The Paris-based agency, however, cautions the demand outlook is now skewed to the downside as the pandemic intensified in the United States and other centers for global oil consumption.
"...strong growth of new COVID-19 cases that has seen the re-imposition of lockdowns in some regions, including North and Latin America, is casting a shadow over the outlook. Only time will tell if the economic impact will be serious," said IEA in its commentary to the report.
On the supply side, IEA estimates global crude production fell by 2.4 million bpd in June to a 9-year low 86.9 million bpd, with declines led by steep production cuts from OPEC+ members and market-driven reductions by North American producers. If those reduction stay in place, global supply could fall by 7.1 million bpd this year before seeing a modest recovery of 1.7 million bpd in 2021.
Baker Hughes reported a 17th straight weekly decrease in the U.S. oil rig count through Friday, down four to 181, the lowest level since the first week of June 2009.
The U.S. oil rig count is down 603 from year ago, with over 475 of those rigs pulled from service in the second quarter. The combined oil and gas rig count in the United States was down five at 258, 700 below year ago.
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