Oils Drops Over 3 Percent As Traders Express Concern Over U.S. Economic Figures

But Goldman still sees a robust 2021 recovery for crude: File Image/PixaBay

The pessimism in crude trading circles - arguably oversold given the data said to have spurred it - continued Friday with the worry that the economic recovery from the government-imposed Covid lockdowns has turned tepid causing oil prices to fall over 3 percent.

Brent settled $1.41, or 3.2 percent lower, at $42.66 per barrel, while West Texas Intermediate fell $1.60, or 3.8 percent, to settle at $39.77 per barrel; for the week, Brent fell 5.3 percent while WTI lost 7.4 percent.

The cause for Friday's losses was U.S. government figures released this week showing that employment remained 11.5 million below its pre-pandemic level and the jobless rate was 4.9 percentage points higher than in February.

Traders apparently took little solace from data in the same report showing that nonfarm payrolls still increased by 1.37 million jobs last month and the overall unemployment rate fell to 8.4 percent last month, compared with a forecast 9.8 percent.

Analysts also worried that more people going back to work would lessen the urgency in Washington to pass additional economic stimulus legislation: "The hopes for more stimulus are going out the window," complained John Kilduff, founding partner at Again Capital, adding that "We need to see economic activity back up to get demand flowing."

Alexander Novak, energy minister for Russia, also struck a downbeat note on Friday by predicting that oil for 2021 would recover to the range of $50-$55 per barrel, partly due to the drop in business travel and the switch to digital conferencing and working from home, all of which reduce travel and therefore oil consumption.

Unquestionably, though, the government lockdowns continue to wreak havoc throughout the il industry, with the customary post-Labour Day weekend drop-off in fuel consumption expected to be a major problem for energy companies that missed out on the summer season's typical profits.

Jeff Lenard, vice president of Advancing Convenience and Fuel Retailing, remarked, "The two next weeks' demand will be the best indicator of how far the commuting and jobs market has returned."

But perhaps considering that countries around the world are expecting a host of Covid vaccines either at the end of the this year or the beginning of next - which presumably will return life to normal - not all analyses of the crude market was negative: Goldman Sachs predicted Brent at $65 by the third quarter of next year, "with additional upside through 2021 as inventories start to normalize and the oil market ends up in backwardation by next summer."

As for vaccine development updates, on Friday Germany's Curevac expects to produce its vaccine at scale (100 million doses) by the end of 2020, with potential limited approval this year to vaccinate high risk people; and Japan's government on Friday said it will bear the cost of providing coronavirus vaccines to its populace, as it aims for total inoculation by the middle of next year.