Huge Job Gains Boost Oil Prices As Goldman Sees Full Recovery in 2022

But fears of a return to Covid lockdowns still persist: File Image/PixaBay

Huge job recovery numbers in the U.S. along with other signs of economic recovery resulted in more gains for crude prices on Thursday, despite the news media's fixation on rising coronavirus rates and their contention it was caused by some states re-opening for business too soon.

The U.S. Labour Department on Thursday announcing that non-farm payrolls increased by 4.8 million in June caused Brent to gain $1.11, or 2.64 percent, and settle at $43.14 per barrel; West Texas Intermediate gained 83 cents, or 2.08 percent, to settle at $40.65 per barrel.

Prices were also supported by Energy Information Administration data showing that U.S. crude inventories fell 7.2 million barrels from a record high last week, far more than analysts had expected.

The recovery isn't confined to North America: it was reported on Thursday that refiners in Europe are moving away from sour varieties of crude towards alternatives such as WTI, West African grades, CPC Blend and Azeri oil - all of which are more suitable for refining into gasoline to power the increasing number of cars hitting the road as the government-mandated virus lockdowns ease.

An importer remarked, "Demand is increasing from a bottom in April, and in July and August demand should be higher."

More optimism on Thursday about oil - and, by extension, the world economy - was provided by analysts at Goldman Sachs, who stated in a note that while global oil demand would decline by 8 percent in 2020, it would rebound by 6 percent next year and fully recover to pre virus levels by 2022.

The analysts theorized that gasoline was enjoying the fastest demand recovery among oil products due to a pick-up in commuting activity, a shift from public to private transportation, and a higher use of cars to substitute air travel for domestic tourism — particularly in the U.S., Europe, and China.

Unsurprisingly though, given the sheer volume of headlines about rising coronavirus rates, many experts were reserved in their estimation of continued good times: "Gasoline has carried the load on recovery and demand, and it's not clear whether that could continue into August and September," said Andrew Lebow, senior partner at Commodity Research Group.

But the notion that governments will reimpose the degree of lockdown measures that crippled the economy and ruined millions of lives is becoming more problematic, and some politicians are openly rejecting health authorities, case in point: Dan Patrick, Lt. Governor of Texas, who said he has stopped listening to America's top infectious disease specialist Dr. Anthony Fauci.

Insisting that his state, which is experiencing rising infection rates, followed medical advice to the letter, Patrick remarked, "He has been wrong every time on every issue; I don't need his advice anymore."

More importantly is the under reported fact that  although infection rates are rising, the virus death rate is dropping significantly, in some cases by 42 percent over a 14 day period, due to younger people being infected and who generally exhibit mild symptoms (despite fears of the health care system being stretched to the limit, the Centers for Disease Control and Prevention stated that the rate of hospitalization for people who test positive for COVID-19 in their 20s is under 4 percent).

More heartening still for the business community is research released on Thursday by Oxford University showing that it's likely a large amount of the population already has a "background level" of protection against Covid-19.

As for the daily progress in bringing to market a vaccine, Oxford also announced on Thursday that it is "optimistic" their vaccine - which will be mass produced by drug giant Astrazeneca and ready for distribution this fall - will give protection "for several years at least."