Strong U.S. Jobs Report Dwarfed By Covid Concerns, Oil Prices Drop

Meanwhile, China benefits from cheap oil amid pandemic: File Image/PixaBay

The U.S. adding 1.8 million jobs in July and its unemployment rate dropping to 10.2 percent proved yet again that analytical arguments about economic recovery stalling due to rising Covid infections are overblown - and yet, concerns about the economy were once more cited as the reason crude prices dropped nearly 2 percent on Friday.

Brent fell 69 cents, or 1.5 percent, to settle at $44.40 per barrel, and West Texas Intermediate fell 73 cents, or 1.7 percent, to end at $41.22 per barrel.

But skittish traders failed to prevent crude from achieving more weekly gains: Brent rose 2.5 percent for the week, while WTI gained 2.4 percent.

Gary Cunningham, director of market research at Tradition Energy, cited another reason for crude's lacklustre performance on Friday: "The U.S. Congress can't seem to come up with a plan for the next round of stimulus and it's creating doubt for U.S. economic recovery."

While the analytical community fretted over Covid, more reports of opportunities being taken in a devastated energy market came to light on Friday: data from the General Administration of Customs showed that China's crude imports in July surged 25 percent from a year earlier thanks to massive purchases made when prices collapsed in April.

In all, 51.29 million tonnes of oil was brought into China last month, equivalent to 12.08 million barrels per day (bpd).

Also, the pandemic is encouraging energy giants to shift policy more towards renewables, and sources on Friday said BP is preparing to sell a large chunk of its oil and gas assets even if crude prices fully recover - a move that brings the company closer to its goal of reducing oil and gas production by 40 percent by 2030 while expanding into renewable energy.

However, the trend of putting a bad news spin on even the best of news prevails, and the U.S. job figures - which saw growth in the leisure, hospitality, retail, and many other sectors - are a case in point: their potential to cause substantial gains on Wall Street as well as in the crude sector were tempered when experts such as Lisa Cook, an economist at Michigan State University, said, "It's encouraging as a standalone report but what is to come scares me: this is still a really weak market."

In this prevailing spirit of pessimism, further advances in a vaccine to end Covid were virtually ignored on Friday and included Japan ordering 120 million doses of vaccine from AstraZeneca for deployment starting next March; India partnering with the Bill & Melinda Gates Foundation to deliver 100 million doses of vaccine to that country early next year; and Russia - which predictably has been criticized for rushing too quickly to develop its own vaccine - offering to supply the Philippines with a Covid cure (for the record, the former Soviet Union is expecting regulatory approval for its first Covid vaccine this month).