Despite media-generated fears of an increase in coronavirus infection rates in some parts of the world, crude traders on Monday took heart in demand continuing to recover and production output reductions being followed - and caused oil prices to rise more than 2 percent.
Trading rebounded from earlier losses after the United Arab Emirates said that the Organization of the Petroleum Exporting Countries (OPEC) members with poor compliance to agreed cuts would meet their commitments; an OPEC-led monitoring panel will convene Thursday to verify if countries have delivered their share of reductions.
It was also reported on Monday that crude throughput in China rose 8.2 percent in May from a year earlier as independent refiners increased processing to meet fuel demand following the easing of lockdowns.
John Kemp, Reuters
Oil prices have come a long way since the trough in early April
West Texas Intermediate rose 86 cents, or 2.4 percent, to settle at $37.12 per barrel, while Brent gained 99 cents, or 2.6 percent, to settle at $39.72 per barrel.
John Kemp, commodities analyst for Reuters, conceded that "oil prices have come a long way since the trough in early April," but he noted that "the strong fund-buying wave which helped accelerate the rise in crude futures prices in late April through May and into the first week of June has faded, leaving the market vulnerable to a pullback."
Goldman Sachs believes a correction on the order of 20 percent in the near term is possible, and in remarking on what it thought was an "incredible" overall economic recovery since governments eased their lockdowns, the bank on Monday said it would continue to avoid the energy sector over the coming weeks (for the record, it favours the tech sector).
Still, a world ramping up requires oil, and pricing continues to be informed by sentiment, which in turn is influenced by headlines; Phil Flynn, senior market analyst at Price Futures Group Inc., said, "It's fear about the coronavirus versus the reality of what's happening on the ground."
Indeed, news media has refocused its attention on new infection spikes and played up the notion they are the result of the economy opening up too soon - even though it was predicted months ago that increases would probably be inevitable not just because more businesses would open, but also especially because more testing would be undertaken.
Michael Waltz, a member of the U.S. House Armed Services Committee, said media should focus instead on hospitalizations and fatalities (meaning, the more that infection rates increase without these two factors coming into play, the less lethal the virus actually is).
In a nod to health officials in some countries toying with the idea of calling for lockdowns to resume, Waltz argued that hospitals are now well prepared to deal with the pandemic: "That is absolutely the place now and we just cannot go back to another shutdown."
If nothing else, the call to close businesses once more in the name of discouraging mass gatherings would presumably hold little weight in the wake of the daily anti-racism protests in cities and towns around the world, none of which seem to have resulted in new virus spikes, as health officials feared.
In fact, in New York City where extensive rioting took place, the infection rates are going down, and preliminary testing on over 3,300 Minnesota protesters revealed an infection rate of only 1.4 percent.
Meanwhile, the European press, which seems more inclined to report good news than their North American counterpart, reported that a vaccine being developed by Imperial College London may cost as little as under $10 per dose (two doses will be required); also pharmaceutical giant Lilly announced on Monday it has enrolled its first patient in a Phase 3 clinical trial to evaluate its rheumatoid arthritis drug, baricitinib, as a treatment for severe cases of Covid-19.
Lilly is also working to develop two different antibody treatments for Covid-19, and a spokesman for the company said "We're hoping for good data in the very near future."