Barclays puts Brent at $41 per barrel for this year: File Image/Pixabay
Oil prices were mixed on Friday but headed to their first weekly decline after six week of gains, as reports of coronavirus infections in six U.S states caused traders to worry that a second wave of COVID-19 could impact growing demand.
Brent settled up 18 cents at $38.73 per barrel, while West Texas Intermediate settled down 8 cents to $36.26 per barrel; both benchmarks logged weekly declines of about 8 percent, still a remarkable achievement overall compared to the negative territory crude plumbed in April.
Stating the obvious, Phil Flynn, senior market analyst at Price Futures Group Inc., said the market was at a crossroads: "If demand continues to improve, the oil market has a lot more to go on the upside; if we get into a situation where we start to take steps back with the coronavirus, the market is going to go down."
Barclays Commodities Research
The fastest improvement in demand is likely behind us
Interestingly, many news media sources blamed the new infections on the reopening of the economy but soft-pedalled the likely source being the anti-racism protests and riots that have attracted thousands of people in cities around the world for the past two weeks.
Also ignored by mainstream media - and thus negatively affecting investor sentiment - is that the majority of those newly infected will likely recover, collectively downgrading the global fatality rate of the virus below 0.4 percent, as calculated on Thursday by the CDC (compared to initial estimates of 1 percent or higher).
For its part, Barclays Commodities Research on Friday raised its oil price forecasts for this year by $4 per barrel, to $41 for Brent and $37 for WTI: it also wrote that "The rate of change in fundamentals is likely to moderate significantly as incremental demand improvement will depend more on consumer behaviour than the easing of enforced movement restrictions."
Barclays forecasts a slow recovery in the near term, not because of an increase in virus cases, but because "the steepest decline in supply and the fastest improvement in demand is likely behind us."
Still, recovery persists, as evidenced on Friday by reports that yet another Texas terminal - Buckeye Partners LP - expects to start loading ships with oil for export in the second half of July; at least 15 other terminals have begun exporting U.S. crude due to growing demand in Asia.
Whether or not the protests are the main source of the rising virus rates, authorities in Europe and Asia say they are prepared to roll back relaxations of the lockdowns - but were unclear whether this applied to businesses or mass gatherings as represented by the protesters; it is believed the upward trend could be reversed in a few weeks.
But good news for those who fear a return of the severe lockdowns that crippled world economies: a new study from the National Academy of Sciences concludes that mask wearing is even more important to prevent the virus's spread than social distancing and stay-at-home orders in regions where the virus is rampant: it found that when mask wearing regulations went into effect in New York, where social distancing, quarantine and self-isolation were already in place - the daily infection rate fell by about 3 percent per day.
Finally, Moderna Inc. is one of many companies that continues to report progress in making a vaccine available : on Friday it revealed that a series of studies showed that its candidate vaccine may not increase the risk of more severe disease and that one dose may provide protection against COVID-19.