Oil Steady as Covid Spectre Tests Resiliency of Traders

by Ship & Bunker News Team
Monday July 6, 2020

The fear generated by on-going reports of coronavirus infection spikes in the U.S. countered by more positive data as the economy recovers from the government-mandated lockdowns resulted in oil prices on Monday ending largely steady.

Brent  settled at $43.10 per barrel, up 30 cents, while West Texas Intermediate settled at $40.63 per barrel, down 2 cents.

Andy Lipow, president of Lipow Oil Associates, summarized the clashing sentiments of traders by remarking, "The competing forces in the oil market right now are the reopening of economies around the world, increasing oil demand, countered by concerns about economies closing around the world due to a resurgence in the number of virus cases."

The concerns about governments resuming their tactic of imposing stay at home orders is understandably troubling, considering the magnitude of damage caused by the first lockdowns: although the economy globally is rebounding, reports from Canada revealed that the drilling rig count has plummeted far below previous records (just 18 were active last week) and may well cause much of that country's equipment to fall permanently out of service.

And in Germany, while industrial orders rebounded in May, one fifth of firms surveyed in a poll published Monday said that they still fear insolvency - an indication that full recovery from the lockdowns could be slow and painful.

Still, the prospect of more lockdowns doesn't correlate with numerous signs that policymakers are loath to reimpose stay at home orders, case in point: Florida governor Ron DeSantis vowed not to bring back sweeping shutdowns even though his state is seeing a huge rise in infection rates, arguing that going back to lockdowns would cripple the economy without saving lives.

If anything, the push to return to normality is increasing, and even supported by the likes of National Institute of Allergy and Infectious Diseases director Dr. Anthony Fauci, who agreed with U.S. president Donald Trump that children need to return to school this fall (for the record, 22 countries have reopened their schools and seen no discernible increase in cases).

Moreover, ING Bank on Monday stated that "The market appears to be shrugging off the surge in Covid-19 cases in the United States" and that data for several cities in affected states did not show a significant reduction in road traffic week on week.

Plus, even though recovery in places like Canada and Germany may be slow, in other areas of the world it is supposedly booming: the official China Securities Journal said in an editorial on Monday that its capital markets are attracting money, setting the scene for a healthy bull market.

One reason that the push to forge ahead despite health threats may be because, despite media fomentations over the rising infection rates, a lot few people are dying: in April and May, Covid-19 in the U.S. caused as many as 3,000 deaths per day, and claimed the lives of roughly 8 percent of infected Americans, but the number of daily deaths is now closer to 600, and the death rate is less than 5 percent.

Another reason people are forging ahead may be a growing distrust of health authorities:on Monday it was reported that the World Health Organization tacitly changed its coronavirus timeline to disclose that it initially heard about the virus outbreak from the Internet, not Beijing officials as it has long insisted.

Finally, another reason for the relative optimism in the business world may be influenced by the fact that the dissemination of an effective Covid vaccine comes closer daily to being a reality: on Monday German biotech company CureVac, which is developing a potential vaccine, secured an $85 million loan to boost its manufacturing capacity; also, Regeneron Pharmaceuticals Inc. said on Monday it has started late-stage clinical trials to assess the effectiveness of its antibody cocktail in preventing and treating Covid-19.