Americas News
Oil Down As OPEC Decides To Boost Production On Strength Of Demand Recovery
The one-two punch of crude producers agreeing to relax production restrictions followed by ongoing concerns of rising coronavirus rates were said to be the key factors in oil prices falling minimally on Thursday.
After the Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce cuts by 2 million barrels per day (bpd) to 7.7 million bpd from August through December, Brent dipped 42 cents to settle at $43.37 per barrel, and West Texas Intermediate fell 45 cents to settle at $40.75 per barrel.
Analysts suggested that traders may have been overly sensitive in their reaction to the reductions, with Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy, saying that "Nobody could really expect OPEC+ to keep the 9.7 million bpd curtailments into August; boosting output by 2 million bpd is not little, but the demand recovery, even though a little slower than expected, justifies it."
Indeed, in another sign of economic recovery that has been occurring ever since governments lifted their lockdowns designed to slow the spread of Covid, China's refinery daily crude throughput in June reportedly climbed 9 percent from a year earlier, reaching its highest level on record due to rising consumption.
But given the unprecedented devastation caused by the first round of lockdowns, analysts fear that the rising virus rates - predominantly in the U.S. - will prompt politicians to enact a second round regardless of the consequences (most notably, California has already ordered closures of some businesses and entertainment venues).
John Kemp, commodities analyst for Reuters, on Thursday stated that although refiners have managed to get fuel stocks under control by increasing crude processing very slowly, "U.S. refiners and the OPEC+ group of oil producers are both walking a tightrope, trying to raise output while remaining alert to the downside threat to consumption from further economic shutdowns."
He added that "The resumption of commuting to work and personal mobility are both under threat."
According to internal research seen by Reuters, OPEC too is worried about the virus: specifically, it fears its record oil cuts will fail to rebalance the market if a second wave of the pandemic undermines an economic recovery later this year and pushes demand down by what it calculates could be 11 million bpd.
Ironically, the conduct of health authorities suggests that if nothing else, the true spread of the virus and its severity may be far different than what mainstream news outlets - which are becoming increasingly aggressive in the U.S. as the November presidential elections draw closer - insist it is.
Following the disclosure earlier this week that Florida labs were not reporting negative Covid test results (thus skewing infection rate numbers), it was disclosed that more than 300 labs that reported 100 percent positive rates conducted five or fewer tests; also, approximately 125 additional labs that reported the results of between five and 460 tests also reported that 100 percent of their samples tested positive, yet all the labs in question processed a small fraction of the state's positive test results.
As for the notion pushed by media that the health care system in some U.S. states is in crisis mode because hospitals in Arizona, California, and Florida are rapidly reaching capacity due to Covid, former New York Times reporter Alex Berenson noted that hospitals, including intensive care units, typically function close to capacity even in normal times.
He added, "Hospitals seem to have....topped out at a level that's high, at a level that's a strain, but not at a level that they can't handle."
By contrast and as usual, media has under reported a steady stream of good news on the treatment and vaccine development fronts, the latest of which comes from Oxford University, where scientists have discovered that a jab of their vaccine candidate (said to be one of the most promising of over 100 development) may offer a "double defence" against the virus.
Also, Itolizumab became the first novel biologic therapy to be approved anywhere in the world for treating patients with moderate to severe Covid-19 complications.
