Oil Prices On The Upswing As More Countries Reopen And Vaccine Trials Show Continued Promise

Meanwhile, the Saudis are headed for a massive GDP contraction: File Image/PixaBay

If Monday's crude trading activity is indication, the optimism over economic recovery as more countries ease government lockdown restrictions due to the coronavirus pandemic seems to be growing - and was the reason oil prices rose once again, this time by 3 percent.

Italy, Finland, and several U.S. states were among numerous governments moving to ease restrictions on Monday, shortly after which Brent settled at $27.20 per barrel, up 76 cents or 2.9 percent, while West Texas Intermediate gained 61 cents, or 3.1 percent, to $20.39 per barrel.

Gene McGillian, vice president of market research at Tradition Energy, noted, “The market continues to price in the idea that things are improving; the slow restart of not only some of the states here in the U.S. but some of the countries in Europe is beginning to partially alleviate some of the demand fears."

Helping along the positive sentiment as well as the physical market is that oil and gas output from some of the world’s top oil companies is set to drop by over 12 percent in the second quarter of 2020 to levels not seen in at least 17 years, according to Reuters.

Exxon Mobil Corp., Chevron Corp. and ConocoPhillips plan to curb as much as 660,000 barrels per day of combined American output by the end of June; Concho Resources Inc. has already curbed about 5 percent of total output and suggested it might slash even more volume.

Meanwhile, one of the key countries that contributed to the collapse of the crude market by drilling all-out in a bid to wrestle market share away from other players, Saudi Arabia, had its sovereign outlook downgraded by Moody's to negative from stable; the kingdom's GDP contraction this year has been forecast as steep as -3.2 percent.

And in North America, California earned headlines for moving into the second phase of lifting coronavirus lockdowns, with some businesses being allowed to open as early as this Friday; but that was not good enough for Sutter and Yuba counties, which followed Modoc County's lead in rejecting the state's stay at home policies and is allowing restaurants, retailers, shopping malls, gyms, salons, libraries and even tattoo parlours to reopen if they limit the number of people inside and enforce physical distancing.

Finally, for traders more concerned about medical matters regarding the coronavirus, favipiravir is the latest treatment drug showing promising results, this time among patients with mild to moderate COVID-19 symptoms; manufactured by Fujifilm, the drug caused patients to test negative within four days and is currently being shipped to 43 countries for further clinical trials.

As for a vaccine that would presumably put an end to social curbing measures and allow the economy to ramp up full throttle by the end of this year, U.S. Health and Human Services secretary Alex Azar revealed that a portfolio of potential vaccines have been assembled and funded according to potential efficacy, with promising and safe results having already been demonstrated in small trials.

He added, "What we are also going to do is invest in manufacturing at the same time so that we can scale up, and that means we may end up with vaccine manufacturing capacity that we don’t need - and so be it."