But the Covid blues continue to firmly cap gains: File Image/PixaBay
Events on Wednesday proved that a dichotomy continues between what crude analysts fear is happening during the pandemic and what is actually the case: a 'surprisingly' steep drop in U.S. inventories - a signal that demand overall is robust - caused a welcome price gain in both benchmarks.
The Energy Information Administration's disclosure of the largest drawdown since December - a drop of 10.6 million barrels last week to 526 million barrels - resulted in Brent on Wednesday settling at $43.75 per barrel, up 53 cents, or 1.2 percent; West Texas Intermediate settled at $41.27 per barrel, gaining 23 cents, or 0.6 percent.
Some observers credited the draw to the Organizaton of the Petroleum Exporting Countries (OPEC) maintaining market supply and balance with its output cuts: "The expectation is that the OPEC cuts are going to lead to bigger draws in the United States and this could be the beginning of it," said Phil Flynn, senior market analyst at Price Futures Group Inc.
Phil Flynn, senior market analyst, Price Futures Group Inc.
The OPEC cuts are going to lead to bigger draws in the United States
Others, however, noted that a growing glut in gasoline and distillates, suggests demand is far from normal, and Gene McGillian, vice president of market research at Tradition Energy, noted that, "Without signs that a demand recovery is taking place at a healthy pace," prices will continue to stall at the current level.
But as has been the case for weeks now, the rising infection rates in the U.S. capped gains, and Stephen Brennock, analyst at PVM, worried that "Europe and Asia are displaying worrying signs of a second surge in cases."
Also of concern on Wednesday were the lingering aftereffects of the government-imposed economic lockdowns intended to curb the spread of the virus: second-quarter earnings reports showed Concho Resources Inc., WPX Energy Inc., and QEP Resources Inc. posting net losses that would have been much worse had it not been for their large hedge books.
Overseas, Total on Wednesday announced an $8.1 billion write down which it partly attributed to the virus; $7 billion of this figure applied to Canada's oil sands, which are costlier and more carbon intensive than conventional fields.
Possibly influencing crude prices later this week is Total and Shell reporting earnings on Thursday, and Exxon and Chevron following on Friday; all are expected to report big losses for the second quarter.