Meanwhile, experts forecast that demand next year will only be at 2017 levels: File Image/PixaBay
Crude prices settled marginally higher on Wednesday due to traders focusing on more evidence that U.S. gasoline consumption is recovering; however, the relentless headlines about rising Covid-19 infection rates were said to have capped the gains.
Brent settled up 21 cents at $43.29 per barrel and West Texas Intermediate rose 28 cents to settle at $40.90 per barrel after the Energy Information Administration disclosed that American gasoline inventories tumbled by 4.8 million barrels as demand climbed to 8.8 million barrels per day (bpd), the highest since March 20.
Also, refinery activity increased by 2 percent.
Bill O’Grady, Confluence Investment Management LLC
It's getting better, but there's still a lot of weaknes
Meanwhile in Canada, Cenovus Energy Inc., Husky Energy Inc., and Baytex Energy Corp. were among companies that have resumed at least 20 percent of shut-in oil sands production, thanks to the commodity's recovery from the government-mandated coronavirus lockdowns.
Presumably alert to pundits who see the bad side of things, Tony Headrick, energy markets analyst at CHS Hedging, was quick to point out that news of stockpile rises such as the record 5 million barrel increase on the U.S. gulf coast is misleading: "The reduction of crude storage held on sea is simply shifting to land at this point, which is not necessarily a bearish omen."
But bad news is precisely what everyone seems fixated on, thus preventing oil from rising substantially above the $40 mark: Bill O'Grady, executive vice president at Confluence Investment Management LLC, said, "It's going to be tough to get prices to move much higher than $40; there's still a ton of demand weakness.
"It's getting better, but there's still a lot of weakness."
In a similar vein, Standard Chartered on Wednesday predicted that oil demand next year will be only at 2017 levels, meaning the coronavirus pandemic will have destroyed four years of growth.
The overriding fear from a business perspective is that governments will reimpose lockdown orders as infection rates rise, but pundits are increasingly convinced this will not happen, and in the case of Serbia, citizenry is determined not to let it happen: Wednesday marked the second day of protesters converging by the thousands in front of the Belgrade Parliament to protest planned lockdowns; government has reportedly reconsidered and will announce instead "restrictive measures" on Thursday.
As for the virus itself, mainstream media did its part on Wednesday to contribute to the gloom by focusing on to the total number of infections in the U.S. breaching 3 million; relatively ignored was that the death rate from the disease is steadily dropping (in the U.K. alone, the proportion of coronavirus patients dying daily fell from 6 percent to 1.5 percent between April and June).
But amid the hand-wringing, the medical community continues to believe a solution to the pandemic - and by extension the economic woes affecting the energy sector - will soon be at hand, even without a vaccine: "It will likely take the form of anti-Covid drugs that will be able to treat patients newly infected and prevent others from becoming ill," wrote William Haseltine, president of ACCESS Health International.
Haseltine explained that the timeline for testing antivirals and monoclonal antibodies drugs - the latter of which prevents infection altogether - is much shorter than that of vaccine testing: "What this means is that even if our path to a Covid vaccine is much longer and harder than we currently estimate, we can still have drugs in hand as early as the beginning of next year that can keep those most vulnerable from becoming infected and could, potentially, treat those already ill."