China recovery also better than expected: File Image/PixaBay
Despite Brent and West Texas Intermediate on Monday posting monthly gains, the price of the crude benchmarks dropped due to the persistent worry of traders that world economies are not recovering from the coronavirus lockdowns robustly enough to absorb a new increase in oil production.
Brent settled down 53 cents at $45.28 per barrel but closed out August up 7.5 percent for a fifth successive monthly price rise; WTI settled down 36 cents at $42.61 per barrel but logged a fourth monthly gain at 5.8 percent.
While oil's recovery by most standards would be remarkable given the historic negative territory into which it plunged earlier this year, observers such as John Kilduff, founding partner at Again Capital, said of Monday's performance, "The issues over demand just aren't showing signs of any real improvement."
John Kilduff, founding partner, Again Capital
The issues over demand just aren’t showing signs of any real improvement
The analytical worries were exacerbated by news from the Energy Information Administration that U.S. oil production climbed 420,000 barrels per day (bpd) in June to 10.44 million bpd; while it was noted on one hand that the boost hardly matched April levels of 11.99 million bpd, on the other it was enough to cause concern that the increase was too much for the market to absorb.
It didn't help that China's crude imports in September were expected to fall for the first time in five months, having accumulated record volumes of the commodity, according to Refinitiv and Vortexa.
But the gloomy sentiments expressed on Monday seemed to be confined to North American analysts: the oil and gas sector in Europe rose more than 1 percent on Monday, due to activity in China's services sector expanding at a much faster pace in August, according to official data.
The rise was also said to have been helped by optimism about Covid treatments, which on Monday saw the European Union vowing to contribute to a World Health Organization initiative to purchase for all countries in the world 2 billion doses of shots from several vaccine makers by the end of 2021 (as for individual initiatives, Novavax on Monday said it reached an agreement with Canada to supply doses as early as the second quarter of 2021).
Activity in the stock market on Monday also threw into question the notion that economic recovery is in a slump, with the three main indexes showing their fifth straight monthly rise following March lows and said to be driven partly by positive ongoing vaccine and treatment developments.