Meanwhile, Yawger says the next six weeks of driving rates are crucial to the market's health: File Image/PixaBay
Despite stunning vaccine and treatment advances that have made Covid-19 considerably less deadly than just a few months ago, the concern over rising infection rates in the U.S. once again paralyzed oil traders, who on Tuesday caused the price of the commodity to drop, albeit minimally.
That, plus worries of a possible fight between Republicans and Democrats over a new economic stimulus package, led to Brent falling 19 cents to $43.22 per barrel, while West Texas Intermediate settled 56 cents lower at $41.04 per barrel.
John Kilduff, partner at Again Capital, complained that conflict between the two political parties over the stimulus bill would weigh on market sentiment: "There's concern with the stimulus out of Washington, which is critical to the oil complex and to supporting demand, especially for gasoline."
Robert Yawger, Mizuho Securities
This has the potential to be bad, bad, bad
In additional developments, Brent this month fell deeper into contango, with October prices as much as 53 cents per barrel above September levels, compared with a 1 cent difference in early July, ans this prompted Warren Patterson, head of commodities strategy at ING, to remark that "This suggests that the tightening we were seeing in the market has eased somewhat, with the demand outlook more uncertain given the resurgence of Covid-19 cases in some regions."
Meanwhile, Reuters interviewed seven current and former Organization of the Petroleum Exporting Countries (OPEC) officials, all of whom worried that long-term oil demand may never recover from the Covid-induced government lockdowns that closed the world economy - and that a shift towards renewable energy sources will escalate as a result.
Robert Yawger, director of the futures division at Mizuho Securities, was another expert who on Tuesday lamented Covid's persistent grip on his sector: "Covid is turning back the clock on demand," he said, adding that the strength of U.S. gasoline consumption over the next six weeks will determine the short-term future of the global oil market: "Look at what just happened: We saw demand level out in the middle of July....the peak of driving season.
"That is not where things should be based on what we know; this has the potential to be bad, bad, bad."
Ironically, Tuesday also saw coverage of a Lancet medical study showing that the worldwide lockdowns that caused the economic meltdown made no difference to coronavirus deaths - but prior health levels such as obesity rates and other factors did.