Analysts now concede that demand recovery is moving forward after all: File Image/PixaBay
Yet again throwing into dispute earlier analytical consensus that demand recovery had stalled, strong U.S. manufacturing data plus a sixth weekly decline in crude inventories caused traders on Tuesday to change tack and give oil a price boost to kick off the new month.
Brent settled up 30 cents at $45.58 per barrel, while West Texas Intermediate settled at $42.76 per barrel, up 15 cents.
The Institute for Supply Management on Tuesday revealed that its index of national factory activity increased to a reading of 56.0 last month from 54.2 in July - the highest level since January 2019 and signifying three consecutive months of growth.
Tom Finlon, GF International
Demand is coming back a little bit
This coincided with strong manufacturing data from China, which also boosted crude prices, as well as the American Petroleum Institute reporting that stockpiles fell by 6.36 million barrels last week compared to predictions of a 2 million barrel draw.
Bob Yawger, director of energy futures at Mizuho, remarked, "The manufacturing numbers and the bullishness around the AstraZeneca virus vaccine added to the optimism."
He was referring to news that the British drugmaker was expanding its agreement with Oxford Biomedica to mass produce its Covid vaccine and keep pace with a possible fast-track approval for use this year instead of next by the U.S.
Other Covid related news that supported Tuesday's overall bullish economic sentiment included new U.S. infections slowing to their lowest level in over two months, and a new report showing that kids going back to school - an issue that has prompted many otherwise employed parents to stay at home with their children - are six times less likely to spread Covid than adults.
Meanwhile in Russia, the rouble firmed due to the recovery in oil prices as investors were encouraged to move into riskier assets.
It's anyone's guess, however, how long the positive sentiment will last, but key observers on Tuesday expressed cautious optimism that the economic recovery was indeed continuing to move forward rather than retreating: "Especially as we see easing of some travel restrictions, we expect people to increase their petroleum demand," supporting prices, said Gary Cunningham, director of market research at Tradition Energy.
Tom Finlon of GF International concluded, "Gasoline inventories are getting pretty close to levels of last year at this time.
"It's indicative that demand is coming back a little bit."