Meanwhile, acquisition and innovations support market recovery: File Image/Pixabay
Signs that fuel demand in the U.S. market is slipping due to the rising infection rates in some states led to a slight slippage on Wednesday of crude prices, with Brent declining 3 cents to settle at $44.29 per barrel and West Texas Intermediate settling 2 cents lower at $41.90 per barrel.
Contrary to a Reuters poll that anticipated a 2.1 million barrel drop, the Energy Information Administration reported an inventory rise of 4.9 million barrels to 536.6 million barrels in the week to July 17.
However, even though U.S. president Donald Trump's admission that the pandemic would probably get worse before it gets better may have contributed to Wednesday's crude price losses, Bjornar Tonhaugen, head of oil markets at Rystad Energy, believed investors might welcome his comments.
Bjornar Tonhaugen, head of oil markets, Rystad Energy
This could be a positive for oil demand prospects
He remarked, "This could be a positive for oil demand prospects: instead of an uncontrolled, disruptive second wave of lockdowns, maybe chances have now increased that the United States will eventually get the spread under control."
Earlier reports that Iraq is not meeting its cutback target under the Organization of the Petroleum Exporting Countries (OPEC) deal was also regarded as worrisome, as was more friction between the U.S. and China, with the former ordering the latter's consulate in Houston to close and retribution expected as a result.
Still, mergers and acquisitions are one of the more assuring components of a global economic recovery that traders crave in these post government lockdown times, and on Wednesday ConocoPhillips announced that it was buying land from Kelt Exploration Ltd. in Canada's Montney shale oil play for $375 million.
The oil resource, located in British Columbia, amounts to 1 billion barrels of oil equivalent, and the deal will allow ConocoPhillips to extend its existing position at an attractive cost, according to Matt Fox, the company's chief operating officer.
Innovation is another assuring sign of market recovery, and on Wednesday it was reported that Chevron Corp., in a bid to cut the cost of pumping oil at a time when margins are razor-thin, is using solar panels to power its Lost Hills, California pumps; this, however, prompted Brian Nowicki, California climate policy director at the Center for Biological Diversity, to complain that "Instead of putting solar panels alongside oil rigs, we should be putting solar panels next to more solar panels; that's how we start truly transitioning to cleaner energy."
As for Covid vaccine developments that supported crude prices earlier this week, potential gains could occur in coming days with news that the U.S. will pay Pfizer and BioNTech $1.95 billion to produce and deliver 100 million doses of their Covid-19 vaccine; also, antibody treatment that literally kills the virus is on the verge of being mass produced, according to reports from Columbia University on Wednesday.