More Weekly Gains For Crude Despite Persistent Fears Over Covid

by Ship & Bunker News Team
Friday August 14, 2020

Exactly 24 hours after being bolstered by strong demand data and declining oil inventories with the expectation that more declines lie ahead, crude traders on Friday let themselves be spooked yet again by news media's coverage of Covid infections and worried that demand would falter - and as a result, crude prices dropped, albeit minimally.

But although Brent settled down 16 cents to $44.80 per barrel and West Texas Intermediate dropped 23 cents to $42.01 per barrel, for the week both benchmarks were up by 0.9 percent and 1.9 percent respectively.

While the obsession over Covid far eclipses its threat as a health risk, promising data about crude's gradual return to proper supply and balance continued Friday when Baker Hughes reported that the number of U.S. oil and gas rigs, an indicator of future supply, fell this week for a 15th straight week to record lows; this came on the heels of earlier reports from Washington that crude, gasoline and distillate inventories fell last week as more Americans resumed normal lives.

Phil Flynn, senior market analyst at Price Futures Group Inc., remarked, "If that trend continues, it's very supportive of prices and should drive prices higher."

Flynn also acknowledged the fragile mindset of the trading community by noting that, "The market wants to break out, but we don't seem to be able to follow through just yet because of these lingering questions about the coronavirus."

John Kemp, commodities analyst at Reuters, agreed: on Friday he wrote that "The second half of June and first half of July marked the peak of optimism about a rapid drawdown in excess oil stocks and a rise in prices; in the weeks since, positive sentiment has been ebbing away."

At least one country's business activities seem not to be affected at all by worries over Covid: shipbrokers on Friday said that China will sharply increase U.S. crude shipments in coming weeks to the tune of at least 20 million barrels for August and September.

China has pledged to buy $18.5 billion of energy products including crude oil and natural gas over its 2017 level, implying total value of about $25 billion this year.

Meanwhile, the countdown to the dissemination of multiple vaccines worldwide continued Friday: the UK signed deals for a further 90 million doses from Janssen and Novavax, taking its total stockpile to  340 million doses (enough for every resident in that country to get five doses instead of the required two); and in the U.S., McKesson Corp. the largest distributor of seasonal flu vaccines in America, was chosen as the central distributor for that country's vaccines - a move that promptly sent the distributor's shares up by over 3 percent.