But one analyst says Covid can't entirely be blamed for the industry's woes: File Image/PixaBay
The U.S. surge in coronavirus cases and their potential impact on economic recovery remained firmly entrenched as the key concern for crude traders, who on Thursday responded to contention over a fresh stimulus package and other matters by causing a 2 percent drop in oil prices.
This was despite a drop in the dollar to a near 22-month low, a phenomenon that usually inspires buying of dollar-priced commodities such as crude.
Traders were spooked by unemployment benefits in the U.S. rising unexpectedly last week for the first time in nearly four months; stoking fears was around the clock coverage of infection rates in that country rising to 4 million, as well as Democrats rejecting the White House's plan to pass a fresh round of coronavirus aid that they regard as "piecemeal."
Kathy Hipple, Institute for Energy Economics and Financial Analysis
I think it is going to be brutal and ugly
Brent fell 98 cents, or 2.2 percent, to settle at $43.31 per barrel, while West Texas Intermediate fell 83 cents, or 2.0 percent, to settle at $41.07.
Meanwhile, the echoes of the government-imposed economic lockdowns were also on the minds of analysts as oil and gas majors such as Equinor, OMV, Eni, Total, Shell, and BP all expected to report their second quarter results over the next two weeks.
Of the widely-feared results of that time period, Kathy Hipple, an analyst at the Institute for Energy Economics and Financial Analysis, remarked, "I think it is going to be brutal and ugly."
Looking ahead, Bjornar Tonhaugen, head of oil markets at Rystad Energy, said, “The trend for COVID-19 cases will likely result in downwards revisions in demand growth forecast from key market observers soon, including ourselves and the agencies, especially for the fourth quarter."
More optimistically, Barclays Commodities Research on Thursday lowered its oil surplus forecast for 2020 to an average 2.5 million barrels per day (bpd), from 3.5 million bpd, and it also said that Brent and WTI would rise to $53 and $50 next year: “We expect a continued supply deficit in oil markets to normalize inventory levels by the end of next year,” it stated, and added that prices could spike if demand recovers more quickly than expected.
As much as industry blames Covid-19 for what may be the worst second quarter showing on record, Hipple said “My big takeaway is that this is not just the result of the virus: These are long-term, decade-old trends,” and she added that the oil industry “is not going away tomorrow, but it is a long-term decline that we are seeing.”
One bit of encouraging news on Thursday came in the form of Washington Post research showing that historically while pandemics (and Covid-19 is one of the least deadly of all) cause severe short-term havoc, they "scarcely register in the standard economic histories, let alone get identified as major turning points," with economies always bouncing back quickly.