But South Sudan is suffering under OPEC's cutback agreement: File Image/PixaBay
As good news persists about coronavirus vaccine trials, the reviving fortunes of oil prices continue, as evidenced on Tuesday as the commodity rose about $1 per barrel.
The all-important prospective end to the pandemic also outweighed concerns about the American Petroleum Institute reporting that U.S. crude inventories grew last week by 7.5 million barrels compared with expectations for a draw of 2.1 million barrels - which some analysts regard as a sign that demand is faltering due to the rising infection rates in many states.
Brent settled up $1.04 at $44.32 per barrel, or 2.4 percent, while West Texas Intermediate settled up $1.15 at $41.96 per barrel, or 2.8 percent.
Awow Daniel Chuang, South Sudan
We are running at a loss
Prices were also supported by European Union leaders agreeing to a 750 billion-euro fund to prop up an economy that is still struggling to recover in the wake of the government-imposed lockdowns; the deal allows billions of euros to be raised on capital markets on behalf of all 27 states.
This coincides with the likelihood of another stimulus package currently being organized by Washington.
Still, experts such as John Kemp, commodities analyst for Reuters, blamed the uncertainty generated by Covid for hedge-fund position-taking in crude and products being "desultory" and compounding the normal summertime trading slowdown; he reported that hedge funds and other money managers purchased the equivalent of 24 million barrels of futures and options in the six most important oil futures and options contracts in the week ending on July 14.
The purchases were focused on Brent and European gasoil, and Kemp said this "may reflect concerns about the resurgence of coronavirus and its potential impact on oil consumption in the United States."
Meanwhile, the Organization of the Petroleum Exporting Countries' (OPEC) effort to maintain a healthy balance of supply and demand is not without consequence to members: on Tuesday Awow Daniel Chuang, the undersecretary in the Ministry of Petroleum in South Sudan, reported that plans to boost output have been delayed to the cartel's supply cut effort and that "we are running at a loss."
South Sudan's official oil production dropped 20,000 barrels to 170,000 barrels per day (bpd) during the lockdowns, and Chuang is hoping on a better year in 2021 to rebuild his oil industry.
By contrast, OPEC member Iraq's crude oil exports have increased by 80,000 bpd so far in July, meaning it is apparently not living up to its pledge to cut 1.06 million bpd in the supply cut deal (if exports hold steady this month, that would mean an adherence drop of 65 percent).
As for the news that boosted crude prices on Tuesday and may well lead to further gains this week, BioNTech and Pfizer Inc. said data from an early-stage trial of their experimental coronavirus vaccine showed that it prompted an immune response, generated a high level of T cell responses, and was well-tolerated.