Russia loses no time upping its output volumes: File Image/PixaBay
Despite the relentless headlines concerning Covid, strong economic data from the U.S., Europe, and Asia on Monday compelled crude traders to curb their worries about the infection spread and caused oil to rise nearly 2 percent.
Brent rose 86 cents, or 2 percent, to $44.38 per barrel, while West Texas Intermediate settled up 74 cents, or 1.84 percent, higher at $41.01 per barrel, on the strength of the Institute for Supply Management disclosing that U.S. manufacturing activity accelerated to its highest level in nearly 18 months in July, during the height of the new Covid outbreaks in the southern states.
Also, manufacturing activity across the euro zone expanded in July for the first time since early 2019, and this prompted John Kilduff, founding partner at Again Capital, to remark, "The industrial sector is picking back up and that portends well for demand going forward."
John Kilduff, founding partner, Again Capital
The industrial sector is picking back up
In China, the government's manufacturing Purchasing Manager's Index unexpectedly rose to 51.1 in July from June's 50.9 (the 50-point mark separates growth from contraction); factory production in South Korea jumped at the fastest rate in over 11 years; and Japan's output ended four months of decline.
Although investors are said to be skeptical about a full recovery in light of the widespread media attention given to climbing coronavirus cases, on Sunday the U.S. reported the fewest new Covid-19 cases in weeks, and infections are slowing in California, Florida, and Texas.
Not all news was positive, however: the start of the week also saw the Organization of the Petroleum Exporting Countries (OPEC) tapering its output cuts from 9.7 million barrels per day (bpd) to 7.7 million bpd, and given the fragile state of the energy market John Driscoll, chief strategist at JTD Energy Services, remarked that, "Now they've restored the balance, prices have recovered, but they have to be very careful because they don't want to be the victim of their own success.
"If prices were to zoom past $45 a barrel, $50 a barrel on the back of these cuts, that may be waving the red cape in front of the U.S. independents, the producers."
OPEC ally Russia lost no time easing its cuts: the former Soviet Union on August 1 and 2 increased its oil and gas condensate output from 9.37 million bpd to 9.8 million bpd, according to sources.
While such actions concern traders, Russia may soon have the distinction of leading the world in helping to end the Covid pandemic - and presumably put markets into full recovery mode: over the weekend its health minister announced that his country's vaccine (said to be similar to the front-runner developed by Oxford University) has undergone accelerated testing, is awaiting regulatory approval, and will be given to citizens en masse in October, starting with teachers and health care workers.