Media-fuelled Covid fears continue to impact crude trading: File Image/PixaBay
Resuming an all-too-familiar pattern, crude prices on Thursday dropped, albeit minimally thanks to a weaker U.S. dollar and Iraq's promise of more output cuts; the declines were due to bankers worrying that Covid resurgences in some parts of the world are slowing economic recovery.
Brent settled down 8 cents at $45.09 per barrel, while West Texas Intermediate fell 24 cents to $41.95 after four consecutive days of gains.
Iraq on Thursday announced it would make about 400,000 barrels per day (bpd) of additional cuts in August to make up for overproduction under the Organization of the Petroleum Exporting Countries (OPEC) supply cuts that have been widely credited for helping to maintain a semblance of healthy supply and demand throughout the government lockdowns to curtail Covid.
Eugen Weinberg, analyst, Commerzbank
We expect prices to correct in the near future
Although this buoyed trading sentiment, the perception that Covid fears are strangling demand - despite a constant flow of encouraging economic data suggesting otherwise - ultimately decided crude's fate on Thursday.
Analysts such as Commerzbank's Eugen Weinberg said, "In the medium term the weak demand is likely to weigh more heavily than the positive sentiment [is supportive], which is why we expect prices to correct in the near future."
Still, U.S. crude futures are up more than 4 percent on the week - the best week since early July - and it is widely expected that if U.S. president Donald Trump signs a second virus relief package within the next few days, futures will climb further.
The contrary analytical opinion, however, holds that the impending U.S. July payrolls report will show a slowdown in job gains and cause a corresponding drop in prices; Bob Yawger, director of the futures division at Mizuho Securities USA, mused that if the report shows no job creation at all, "That's a horrible demand indicator for crude oil."
Meanwhile, angered by the economic devastation, former New York Times reporter Alex Berenson reiterated that media organizations led a "panic" that pushed officials to institute ineffective stay-at-home orders earlier this year and in the past week due to the rising infection rates - even though countries like Sweden did not lock down at all and appears to have beaten the pandemic, and despite the highly-publicized infection rates in the U.S. sun belt causing far fewer deaths than in the Northeast in March and April.