Crude Traders Downplay Economic, Vaccine News, Cause 1% Dip In Oil Prices

by Ship & Bunker News Team
Tuesday August 11, 2020

A return of risk appetite was exhibited on Tuesday in the stock futures sector due to encouraging economic numbers and Russia becoming the first country in the world to distribute a Covid-19 vaccine - but the enthusiasm wasn't shared by crude traders, who cited a stalled U.S. stimulus package and rising infection rates as the reasons for causing oil prices to fall about 1 percent.

Brent fell 49 cents, or 1.1 percent, to settle at $44.50 per barrel, and West Texas Intermediate fell 33 cents, or 0.8 percent, to finish at $41.61 per barrel.

Perhaps proving that crude traders won't be denied their concerns even in the face of remarkably positive news, the oil losses were incurred in spite of a rally in European stocks, which rose for a third straight session as automakers gained on firm sales data from China; also, Euroilstock data showed that European refinery crude intake in July rose 3.3 percent from June.

Further, official figures showed that while U.S. passenger airline traffic was down 80 percent year on year in June, it still rose to nearly twice May's levels; and if that wasn't enough, the U.S. Department of Energy reported that energy companies have begun taking back millions of barrels of oil from the government's emergency stockpile after renting storage to manage a glut of crude this spring.

Plus, after Tuesday's session settled the American Petroleum Institute showed that crude stocks fell by 4 million barrels last week, more than analysts' expectations of a 2.9 million-barrel draw.

However, while Dow futures rose on the strength of Russian president Vladimir Putin announcing that his country's Covid vaccine has passed all required checks and mass vaccination will begin in October (reportedly his daughter has already been given it), crude traders chose to focus on concerns that the vaccine's rushed development may have compromised its safety.

Gary Cunningham, director of market research at Tradition Energy, said, "Now there's doubt coming out on the stimulus package and the Russian news as well."

As for declining crude supplies, Bart Melek, head of global commodity strategy at TD Securities, complained that "We still continue to have an overhang and a significant amount of spare capacity within OPEC [the Organization of the Petroleum Exporting Countries]."

Traders also ignored U.S. president Donald Trump announcing that Washington will purchase 100 million doses of Moderna's vaccine,  currently in late-stage human trials.

Also curiously underplayed on Tuesday were reports that another 16 U.S. energy firms filed for protection from creditors last month, due to oil prices still below levels that are profitable for many companies.