Chevron, other firms announce more layoffs: File Image/PixaBay
A steady improvement in U.S. refining activity was enough for crude prices on Thursday to resume their winning streak, buoyed by the easement of government-induced lockdowns globally that contributed to a consumption contraction of 30 percent at the height of the pandemic scare.
Brent rose 55 cents to settle at $35.29 per barrel, while West Texas Intermediate rose 90 cents to settle at $33.71.
A surprise build in U.S. inventories was downplayed by traders, given that the 7.9 million barrels logged last week were due to a big increase in imports from Saudi Arabia rather than a decrease in demand, according to the Energy Information Administration.
A decrease in commuting and business air travel is clearly negative for oil demand
But still, the damage caused by governments in their zeal to control the spread of the coronavirus is still unfolding: Chevron Corp. announced it would eliminate up to 15 percent of its global workforce in coming months, following Halliburton Co. stating it would cut 22 percent of its headquarters staff.
Also, Amrita Sen, chief oil analyst at Energy Aspects, said shale growth might not return to 1 million barrels per day if lending remains constrained.
Such disclosures, combined with the sheer volume of oil pumped prior to the pandemic, caused Robert Kaplan, president of Dallas Federal Reserve Bank, to predict that "it will take probably until sometime in the second half of 2021, depending on economic growth, to work off all this excess inventory that we have globally.
"And if we grow more slowly, it will take into 2022."
Meanwhile, the so-called "new normal" of remote working so many analysts think will be a permanent legacy of the pandemic could be a major threat to oil demand, according to analysts.
Bernstein said in a note to clients, "A decrease in commuting and business air travel is clearly negative for oil demand," a sentiment echoed by S&P Global Platts and Raymond James, the latter of whom believed online education will also eat away at demand.
But analytical projections are frequently incorrect, and previous downturns - including those of 2008 and 2001 - were accompanied by dire predictions of permanent lifestyle changes, almost all of them rendered moot during the subsequent economic recoveries; indeed, despite the media hype over remote working, BW People Businessworld suggested that working from home will only be possible for those in the IT and BPO sectors, if that.
As for questionable predictions on the coronavirus front, California hospitals are now reportedly laying off thousands of health care workers and facing $14 billion in lost income due to earlier this year forbidding routine procedures, purchasing protective equipment, and setting up field hospital in anticipation for a deadly surge of the virus - which never came.
Josh Owens, content director at Oilprice.com, stated that "When it comes to epidemics we are incredibly poor judges of how much of a danger they really pose; our intensely interconnected societies and sensationalist media mean that this failure of judgment can translate into mass hysteria and fear in the markets."
Finally, for those who only see a full return to normal with the development of a Covid-19 vaccine, scientists who recently concluded the first phase of a trial vaccine in China told the Lancet that it is proving to be safe as well as effective; this prompted Health Canada to announce it has approved a clinical trial for the formulation in that country.