Crude Down But Demand Continues To Grow As Lockdowns Ease

Meanwhile, J.D. Power thinks the auto industry is "firmly" in recovery: File Image/PixaBay

Worries about a second wave of coronavirus spurred by reports of increased infections in Germany and Wuhan, China caused a decline in crude prices on Monday, albeit not nearly as severe as the losses incurred during the early days of the pandemic.

Brent fell $1.04 to $29.93 per barrel, while West Texas Intermediate fell 30 cents to $24.44 per barrel.

The losses were said to have been minimized by a Saudi Arabia energy ministry official saying he  has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million barrels per day (bpd).

Perhaps with the awareness that new infections aren't necessarily  bad news (the more people who test positive for the coronavirus without exhibiting severe symptoms means the virus is far less lethal than originally thought), the mood within energy industry circles remained cautiously optimistic: Prince Abdulaziz, energy minister for the Saudis, told reporters that his kingdom wants to be "ahead of the curve" and he sees signs of demand picking up as countries move to ease restrictions on movements imposed over the past months.

Following the Saudis' announcement, Kuwait and the United Arab Emirates said they would also implement additional output cuts, and Rystad Energy noted that with the new cuts global storage capacity - which had been a major concern of crude analysts over the past month - will most likely not reach capacity.

Jeff Currie, head of commodities research at Goldman Sachs, had mostly good news for those hoping for a return of demand: on Monday he said that industrial demand and commuting demand should both be able to recover fairly quickly from the government lockdowns.

However, he warned that jet travel demand may never fully recover in a post pandemic world, and this in turn will contribute to oil demand not normalizing back to pre-crisis levels until later in 2022.

Meanwhile in the all-important retail sector that contributes to people using their fossil-fuelled cars, the U.S.'s biggest mall owner Simon Property Group said it plans to have about 50 percent of its malls and outlet centers reopened again within the next week; Macy's, Gap, and Nordstrom are enacting plans to reopen in phases.

Thomas King, president of data analytics at J.D. Power, said of the auto industry on Monday, "We continue to see evidence that we are over the worst and we are firmly in recovery"; this came on the heels of reports that declines in the two largest-hit sectors of restaurants and travel may have hit bottom in North America.

Ohio governor Mike DeWine (90 percent of whose state will reopen by Tuesday) echoed the sentiment of the back to work movement by telling media that reopening the economy is inherently risky - but far riskier are the economic, physical, and psychological risks of a world staying at home.

Ironically, the World Health Organization, which backed the Chinese-style global lockdowns and has been widely criticized for initially downplaying the virus's impact, now says Sweden - which refused to lock down  - may have taken the correct approach to dealing with the pandemic.

Mike Ryan, the WHO's top emergencies expert, was quoted by The Washington Post as stating, "If we are to reach a 'new normal,' in many ways, Sweden represents a future model; what it has done differently is that it really, really has trusted its own communities to implement that physical distancing."

For the record, Sweden's death toll is around 3,000 out of a population of 10 million, compared to Britain, which imposed severe lockdowns and at over 30,000 out of a population of 66 million has the highest death toll in Europe.