Americas News
More Weekly Gains For Oil But Analysts Still Singing The Covid Blues
With another minor dip in oil prices on Friday due to Hurricane Laura not living up to its potential and oil companies resuming production much sooner than expected, analysts noted that the commodity is in a curious state of low volatility.
As Brent fell 4 cents to settle at $45.05 per barrel and West Texas Intermediate fell 7 cents to $42.97 per barrel, Eugen Weinberg, head of commodities research at Commerzbank, said crude "didn't even react to a weaker dollar - there's no impulse in either direction.
"It has seldom had so little volatility for such a long period, especially given the dynamic situation on the demand and supply sides."
Meanwhile, Shell on Friday said it was beginning to redeploy personnel to all its assets in the Gulf of Mexico not impacted by Laura, and Valero Energy Corp began restarting its 335,000 barrel per day (bpd) Port Arthur, Texas, refinery.
PVM Oil Associates said in a note that aside from bullish comments recently made by Saudi Arabia, "Everyone else is clear that global oil demand won't return to 2019 [levels] until at least 2022: the latest monthly estimate from the IEA/EIA/OPEC triumvirate suggests consumption will not recover to pre-pandemic levels next year."
But analysts by nature are inclined towards pessimism, and it's worth noting that despite two consecutive days of losses crude still notched weekly gains of about 1.5 percent, with WTI rising for a fourth straight week - defying the media narrative that demand recovery in the wake of the government mandated coronavirus lockdowns has stalled due to rising infection rates.
Also, the U.S. Commerce Department on Friday reported that consumer spending increased more than expected in July by 1.9 percent, boosting expectations for a sharp rebound in economic growth in the third quarter; additionally, there has been a rise in personal income after two straight monthly declines.
Still, Josh Graves, senior market strategist at RJ O'Brien & Associates LLC, on Friday stated in simple terms what it will take for the economy - and crude demand - to fully rebound: "Until they get a vaccine developed and people are comfortable travelling again then you're going to see much interest in being long energy markets, let alone being long crude."
On that score, while many analysts repeat the outdated narrative that vaccine development is problematic, on the medical front it has progressed from being uncertain to a sure thing thanks to process protocol being abandoned: U.S. president Donald Trump said a vaccine could be approved before the November 3 elections, and Goldman Sachs is confident a solution to the pandemic will arrive before the end of this year.
In other parts of the world, the UK has given fast-track approval for use of a vaccine as early as October, before it has been given a licence by the European authorities; Moderna on Friday said it was in talks with Japan to supply 40 million or more doses of its vaccine candidate in the first half of 2021; and Johnson & Johnson will begin mid-stage trials for its vaccine in Spain, the Netherlands, and Germany next week.
Over 150 vaccines are being developed and tested globally, and 30 are in human trials.
