Oil Prices Climb Again Despite Saudi Arabia-Induced Crude Build

by Ship & Bunker News Team
Wednesday June 10, 2020

Oil prices on Wednesday continued their long climb back to normality, thanks to rising product demand and despite news that crude stocks rose by 5.7 million barrels last week, according to the Energy Information Administration.

Brent settled up 55 cents to $41.73 per barrel, while West Texas Intermediate rose 66 cents to $39.60.

The inventory build was due to a third consecutive week of big imports from Saudi Arabia, hence demand wasn't affected; the U.S. Energy Department announcing it had purchased 126,000 barrels of crude for that country's strategic reserve was another support to crude traders.

It was also disclosed on Wednesday that the SPDR S&P Oil and Gas Exploration and Production ETF is having its best quarter on record, climbing over 102 percent since April 1 despite  oversupply concerns.

But this didn't impress Todd Gordon, managing director at Ascent Wealth Partners; he said, "On the demand side, 70 percent of oil is consumed through transportation, so, with electronic vehicles coming online and ride-sharing, once Covid ends, we think that demand will go away."

John Kemp, commodities analyst for Reuters, noted that traders' expectations of a substantial reduction in global stocks over the next year as the world economy recovers from the government-imposed coronavirus lockdowns "are consistent with the gradual drawdown in global oil stocks predicted by the major statistical agencies."

He added, "There is now a dominant view that the market will rebalance over the next 18 months, provided OPEC+ maintains its commitment to reduced production, U.S. shale output does not surge again, and there is no second wave of coronavirus."

Even though media is lockstep with government in warning of that second wave, medical researchers admit they have no idea if there will be one, or that if resurgences of the virus will be as potent as the first wave (subsequent outbreaks in Asian countries show the virus to be only a fraction of the strength of the initial COVID-19 strain).

Meanwhile, in an Orwellian development that will surely affect the business and demand landscapes if it comes to pass in the near future, experts are predicting that if virus survivors are found to be immune, they could perform a range of jobs and services risk-free and be given greater freedoms depending on how the authorities respond.

Media notes that the concept is already being adopted by the private sector, but sociologists warn that organizing people into 'haves' and 'have nots' will lead to discrimination and, by extension, impede economic recovery.

As for a cure that will presumably end the panic over a virus that has a 96 percent plus survival rate, Johnson & Johnson announced on Wednesday it will commence human trials for a vaccine (one of over 100 in rapid development) in July, two months ahead of schedule.

For the time being, the global economic recovery continues, with many of Europe's internal borders open again from mid June and external borders to be lifted July 1.