Businesses are worried about a second wave of lockdowns: File Image/PixaBay
Thursday saw a repeat of the two ingredients driving trading in the previous session: data revealing that crude inventories dropped again, which caused modest gains for oil prices, and lingering fears over the economic fallout caused by the government-imposed virus lockdowns - which capped Thursday's gains.
Brent traded up 31 cents at $36.06 per barrel, while West Texas Intermediate was up 43 cents at $33.92 per barrel.
Paola Rodriguez Masiu, analyst for Rystad Energy, said, "Global supply has been curtailed to a great degree; we are on a clear path to a gradual recovery now."
Paola Rodriguez Masiu, analyst, Rystad Energy
We are on a clear path to a gradual recovery now
Capital Economics in a note credited the Organization of the Petroleum Exporting Countries (OPEC) and its allies for encouraging the price rally and noted that "We expect this to be the story for some time yet as OPEC+ cuts help to put a floor under prices in the second half of this year."
The market was also presumably buoyed by news that top U.S. airlines and Air Canada on Tuesday reported slower ticket cancellations and an improvement in bookings on some routes, even though demand remained weak.
Other analysts pointed out that in the U.S. at least, the upcoming Memorial Day holiday could be a test for the gasoline market: demand is about 30 percent below where it was prior to the government imposed lockdowns; and although some experts have reported that people are merely getting behind the wheel to get out of the house as the economy reopens compared to driving to and from work, the numbers are still welcome.
Michael Tran, global energy analyst at RBC, said, "We're headed in a trajectory with the reopening of the economy: people are going to drive more as we go deeper into the summer, and I think given a lot of work-at-home policies are going to remain in place."
An indicator of possible positive things to come for gasoline demand is China, where despite a minor resurgence in the coronavirus the economy is aggressively returning to normal and people appear to be abandoning public transportation in favour of automobiles due to health concerns.
Of course, the continued demand growth depends on several factors, the biggest being what politicians and health officials will do if a second wave of the virus occurs.
The question is especially salient as more arguments were made on Thursday that the worldwide Chinese-style lockdowns were misguided and caused more harm than good: in response to Centers for Disease Control and Prevention (CDC) data reaffirming that Covid-19 takes a disproportionate toll on the elderly, Dr. Simone Gold, an emergency medicine specialist, told media that "There's always exceptions....But when you look at the pure numbers, it's overwhelmingly patients who are in nursing homes and patients with serious underlying conditions, meaning, that that's where our resources should be spent."
Gold, the co-founder of A Doctor a Day, which opposes shutdowns over the potential health harms of the measures, added that "I think it's terribly unethical: part of the reason why we let [the virus] fly through the nursing homes is because we're diverting resources across society at large; we have limited resources, we should put them where it's killed people."
Market fears that capped crude gains on Thursday were partly driven by politicians who maintain a perverse 'the needs of the many don't outweigh the needs of an extreme few' stance and refuse to fully reopen for business until a vaccine is developed.
But as far as U.S. president Donald Trump is concerned, the needs of nearly 40 million people out of work in his country alone are rapidly taking precedence, and while he acknowledged that a second wave of the virus may occur, he stated emphatically on Thursday that he wouldn't let any further outbreaks shutter the economy: "We're going put out the fires; we're not going to close the country."
Meanwhile, yet more troubling evidence on Thursday surfaced about the questionable ways health authorities are determining Covid-19 infection rates when media asked the CDC why it was combining results for diagnostic tests, which identify current infections, and serological tests, which detect whether someone has previously been infected.
The CDC, which previously stated it would separate the data from the two tests, did not respond to the query.