Also, OPEC is reporting a high compliance rate for its output cuts: File Image/PixaBay
In what is proving to be a see-saw response to an enduring concern - namely, rising coronavirus infections in some parts of the world, including the U.S. - crude traders caused oil prices on Wednesday to drop, albeit minimally.
Brent settled down 25 cents at $40.71 per barrel, while West Texas Intermediate fell 42 cents to $37.96 per barrel.
The slide was also due to U.S. crude inventories rising to a record high last week for a second straight week, reaching more than 539 million barrels, and this caused Gene McGillian, vice president of market research at Tradition Energy, to remark, "The market is trying to find whether it has enough strength to resume its rally that took us above three-month highs."
Gene McGillian, VP of market research, Tradition Energy
The market is trying to find whether it has enough strength to resume its rally
Despite the COVID-19 concerns, the mood in the analytical and investment communities remained optimistic, buoyed by news that compliance with the Organization of the Petroleum Exporting Countries' (OPEC) output cuts deal stood at 87 percent in May, a source familiar with the data told media on Wednesday.
Also, it was revealed that U.S. shale producers are expected to restore roughly 500,000 barrels per day (bpd) of crude output by the end of June, and David Hager, chief executive at Devon Energy Corp., echoed the sentiment of his colleagues by stating, "With prices where they are now, if they stay above $30, I wouldn't expect any significant curtailments from us in Q3 or beyond."
There also seems to be an emerging confidence about sustained economic recovery whether or not COVID-19 remains an issue for the foreseeable future: speaking at a virtual meeting of 16 of the world's leading energy executives Tuesday night, Dr. Sultan Ahmed Al Jaber, who is the United Arab Emirates minister of state and CEO of Abu Dhabi National Oil Company Group, remarked, "We are seeing encouraging signs of a rebalancing oil market and the beginnings of economic recovery.
"I believe that there have been and there will continue to be valuable lessons we can all share with each other across a range of critical issues, but most importantly, on how to ensure the safety and the well-being of our people, the resilience of our business, and the long term growth of our industry."
As for the virus itself, while media has largely confined itself to the scare tactics of reporting rising infections rates and worrying that a second wave is possible, researchers have repeatedly pointed out that the more infections that are reported, the less lethal the virus becomes by virtue of the vast majority of those infected suffering only mild symptoms or no symptoms at all.
In late May, extensive testing revealed that COVID-19's fatality rate had dropped from an estimated 5 percent-plus when the pandemic began to 0.5 and 0.8 percent in late May, to the current 0.4 percent (or 0.05 percent for those from ages 0-49) as calculated by the Centers for Disease Control.
Meanwhile, following Tuesday's news of the breakthrough treatment drug dexamethasone come reports that 240,000 doses of the drug are in stock and on order in the UK potentially for the 385 people on mechanical ventilation in that country and those on oxygen support.
Also on Wednesday, the CEO of Moderna, which is the front-runner in the race for a COVID-19 vaccine, predicted an 80 to 90 percent probability of the vaccine having efficacy of above 50 percent - and that more data gathering from trials could boost that efficacy to 90 percent (the company recently signed a deal with manufacturer Lonza to make 500 million to 1 billion doses of the vaccine each year.