Oil Up Marginally on OPEC News But Still Weighed Down By Covid

by Ship & Bunker News Team
Tuesday July 14, 2020

Yet again, worries about U.S. governments restricting economic activity to slow rising coronavirus rates affected crude trading on Tuesday - however, not enough to prevent a slight rise in prices, with Brent climbing 18 cents to settle at $42.90 per barrel and West Texas Intermediate rising 19 cents to $40.29.

Ironically, the gains were accompanied by a media investigation that throws into question the validity of reported infection rates in the hardest hit of U.S. states.

Tuesday's trading activity was buoyed by  the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) stating that the global oil market is moving closer to balance as demand slowly rises.

He made these remarks in advance of OPEC and its allies deciding on the next level of production cuts;  the cartel on Wednesday is set to reduce its record production cut of 9.7 million barrels per day (bpd) to 7.7 million bpd from August through December.

More good news from OPEC came in the form of a report showing that the cartel has delivered compliance of 107 percent with their agreed oil output cuts in June - a sign it is serious about maintaining the delicate balance between supply and demand.

For his part, Julian Lee, oil strategist for Bloomberg, thinks OPEC "Will opt to ease the cuts in August," partly because "global oil forecasts are more optimistic about demand than they were when the group last met in early June," and also because constant revising "may be seen as indicating a lack of resolve on the part of the producers."

However, Less sided with other analysts in the fear that the rising Covid infection rates and the response by some governments to restrict economic activity "could quickly undermine the recovery in oil demand."

Amrita Sen, chief analyst at Energy Aspects, suggested that patience should be exercised in assessing the market: specifically, she told media that "Everybody agrees it's the early days" of the recovery and that "it won't be in a straight line....but stocks are drawing everywhere; the U.S. is going to be the last place to draw but we are expecting draws tomorrow."

Meanwhile, further skepticism over the way the coronavirus is being reported in the U.S. grew on Tuesday when Fox 35 News approached Florida laboratories that had reported 100 percent or very high infection rates and were told that negative test results had not been included in the tally.

As a result, Orlando Health confirmed errors in the report, and its positivity rate was said to be 9.4 percent, not 98 percent; and the Orlando Veterans Affairs Medical Center's positivity rate was actually 6 percent, not 76 percent as seen on the report.

The Florida Department of Health confirmed that some labs had not reported the negative cases as required.

Another virus-related issue preventing full-blown economic recovery - the reluctance of education officials to send kids back to school, thus preventing many parents from returning to work - was tackled when former New York Times reporter Alex Berenson, a leading critic of the effectiveness of lockdowns, said schools  "are open essentially all over the world, certainly most of the developed world, they are open in more and more places without any meaningful restrictions on student activity.....the reason is very simple: children are at extremely low risk from SARS-CoV-2 [coronavirus], young adults are at extremely low risk from SARS-CoV-2."