However, analysts still worry that virus restrictions may affect demand recovery: File Image/PixaBay
Worries about the coronavirus, stoked by the news media's relentless coverage of rising infection rates in the U.S., caused nervous traders to send oil prices lower on Tuesday, albeit minimally.
However, the losses were minimized by ongoing signs that despite some countries regressing in their attempt to contain the spread of the virus, others were enjoying a swift economic recovery; plus, those reading beyond front page stories were presumably buoyed by reports that more countries are coming ever-closer to bringing vaccines to market.
Ongoing coverage of Texas, Arizona, Florida, and California seeing record rises in infections resulted in the September contract for Brent settling down 58 cents at $41.27 per barrel (the August contract, which expired on Tuesday, fell 56 cents, to $41.15); West Texas Intermediate dropped 43 cents at $39.27 per barrel.
Jim Ritterbusch, president, Ritterbusch and Associates
Sustaining the independent show of gasoline strength will be challenged by coronavirus headlines
The losses were minimal enough for both contracts to once again achieve monthly gains: Brent has gained 16.5 percent in June and 81 percent on the quarter, while WTI has risen 12.4 percent in the past month, up about 95 percent in the quarter.
However, Jim Ritterbusch, president of Ritterbusch and Associates, summarized the sentiments of analysts in general by remarking that "Sustaining the independent show of gasoline strength will be challenged by coronavirus headlines where news has seen a definite negative shift in recent weeks."
But that news is confined largely to the U.S.; word came on Tuesday that the Organization of the Petroleum Exporting Countries (OPEC) and Russia will likely ease their record oil production cuts from August as global oil demand recovers; sources said most likely they will be eased to 7.7 million barrels per day (bpd) from the current 9.7 million bpd.
Also, ConocoPhillips on Tuesday said it will begin restoring curtailed oil production in July as crude prices rebound from the government-imposed virus lockdowns.
All-important air travel continued to show improvements in volumes, with Dublin-based Ryanair being the latest carrier to announce, on Tuesday, that it will return to a more normal schedule in July (it expects to fly over 4.5 million passengers next month).
This disclosure came on the heels of a Reuters poll of 45 analysts showing that oil prices will consolidate at around $40 per barrel this year, with a recovery gaining traction in the fourth quarter and into 2021.
That said, the fear generated by the coronavirus remains a problem in all markets, and Giovanni Staunovo, an analyst at UBS, pointed out that "End-2020 demand will likely fall well short of end-2019 levels given that people will take some time to return to their old habits after restrictions are lifted."
Arguably, mainstream news media coverage of the virus continues to play a significant role in sustaining that fear; aside from giving the impression that the rising virus rates in the U.S. mean mass deaths (in fact, the new cases are largely among young people who, overwhelmingly, are expected to fully recover from the disease), coverage overall is misleading, a case in point being widespread headlines on Tuesday of Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, telling a U.S. Senate committee that there is no guarantee of a safe vaccine coming on the market anytime soon.
In fact, Fauci mentioned that as a disclaimer to his main message that scientists are "cautiously optimistic" for a vaccine release in 2021: "Hopefully there will be doses available by the beginning of next year."
Meanwhile, the U.S. Food and Drug Administration on Tuesday released guidance for approving a coronavirus vaccine: it must prevent or decrease disease severity in at least 50 percent of people who are inoculated, compared to 30 to 70 percent of flu vaccines.
Also on Tuesday, in India Bharat Biotech's vaccine was approved for human trials, that country's first domestic candidate to get the green light.
Finally, more information was disclosed on China's use of an experimental vaccine for the country's military: clinical trials have shown a "good safety profile" with initial results indicating that Ad5-nCoV could prevent diseases caused by SARS-CoV-2, which causes Covid-19.
Canada allowed human trials of the Ad5-nCoV vaccine in May: "This vaccine candidate holds great promise," Iain Stewart, president of the National Research Council of Canada, said in a statement at the time.