But the Saudis think a return to normal for crude will begin in the fourth quarter: File Image/PixaBay
Crude trading on Wednesday was soft despite prognostications of healthy demand recovery for 2020, as traders were gripped by yet another variation of the Covid fears that have dominated trading for five months now: the prospect of a second wave of the virus ruining the world economy.
Bren settled at $45.37 per barrel, down 9 cents, but West Texas Intermediate ended 4 cents higher at $42.93 per barrel, possibly due to news that the U.S. Federal Reserve is considering policy tweaks that could sustain aggressive stimulus measures.
Traders were given distinctly mixed messages regarding the state of the economic recovery in the wake of the government imposed pandemic lockdowns: while Energy Information Administration data showed that U.S. crude oil stockpiles fell 1.6 million barrels last week, fuel demand was down 14 percent over the last four weeks.
Phil Flynn, senior market analyst, Price Futures Group Inc.
The only thing that is holding us back is demand
This caused Phil Flynn, senior market analyst at Price Futures Group Inc., to remark that "The drop in gasoline demand week-over-week was a concern: that's still showing weakness.
"The only thing that is holding us back is demand."
Also, while draft statement from the Organization of the Petroleum Exporting Countries (OPEC) seen by media on Wednesday said a second prolonged wave of the pandemic was a major risk for the oil market recovery, this was countered by Saudi Arabia's prince Abdulaziz bin Salman, who stated during Wednesday's OPEC meeting, "Based on the average projections of various institutions, ... it is estimated that the world will reach about 97 percent of pre-pandemic oil demand during the fourth quarter - which is a big recovery from the huge falls in April and May."
Bijan Zanganeh, oil minister for Iran, offered yet another opinion about the recovery on Wednesday: he told state TV that "The market is not stabilized yet for several reason including the coronavirus outbreak....but OPEC has taken good measures."
Indeed, news agency SPA reported that the ongoing "importance of compliance, by all participants, to the OPEC+ agreement and the agreed upon compensation mechanism" was stressed during Wednesday's meeting by OPEC leaders, further cementing the cartel's status as a stalwart in market balance during the pandemic.
The uncertainty of many countries regarding a possible full return to normality was not shared by China, which over the weekend saw thousands of mask-less party goers standing shoulder to shoulder at a music festival in Wuhan, the first epicentre of the Covid virus; Wuhan claims it has tested all of its 11 million inhabitants and only found 300 asymptomatic cases.
In a similar vein, many countries including Australia and New Zealand are reporting significant drops in coronavirus rates, and even in countries with rising infections hospital rates are declining; also on Wednesday, the head of Germany's vaccines regulator said his country's residents could start being vaccinated against the virus at the beginning of 2021; but it is unclear whether any of this will affect crude prices in the days ahead.