© Reuters. By Barani Krishnan
Investing.com – Did OPEC Do It? The days and weeks ahead will tell.
In what could be considered the equivalent of the oil market to skiing on a cliff, the Organization of the Petroleum Exporting Countries boldly launched this week to cut production cuts at a time when fuel demand might be suspect at best. of cases, just as the United States experiences a dramatic new high in Covid-19 cases.
“OPEC + is eager to see higher oil prices as soon as possible, but its ambition is likely to be thwarted in the short term by renewed smoothness in fuel consumption,” Reuters oil analyst John said on Friday. Kemp in a post.
Kemp said fuel traders and refineries were becoming more pessimistic about the outlook for the global economy and transportation for the rest of this year, even as OPEC + crude producers try to drive up oil prices.
“Premiums for gasoline and diesel prices on crude have been stable or falling for almost four weeks since June 23 amid growing anxiety over a resurgence of the coronavirus and a new round of blockades,” he added.
The rise in oil prices has stagnated since OPEC announced on Thursday that 20% of the production cuts it had held since the beginning of May would fall from next month. By granularity, that meant the OPEC + alliance led by Saudi Arabia and assisted by Russia will retain 7.7 million barrels a day of the market from August, compared to 9.6 million in July.
Even before the latest episode of weakness, US refineries have been forced to restrict crude processing to allow excess fuel inventories inherited from the shutdown to be absorbed.
Gasoline consumption in the United States has been fairly flat for the past three weeks as the lockdown emergency has run into a new wave of coronavirus cases.
Gasoline margins have been trending downward since June 23, after a strong rebound in the past three months as major economies emerged from the blockade.
Diesel margins have been more stable during the pandemic, but the modest uptrend has faded in recent weeks.
Past expectations of a rapid and full V-shaped recovery are giving way to fears of a prolonged period of below-trend production and employment.
Kemp said the renewed weakness in gasoline and diesel prices was signaling refineries that they may need to cut processing rates to prevent further build-up in stocks.
“Refineries are caught between OPEC +, which wants to drain excess crude inventories as quickly as possible and increase oil prices, and slow consumption of gasoline and diesel,” he added.
On the precious metals front, gold hit a sixth consecutive week of winning on Friday as a new spike in the coronavirus, uncertainty for the global economy and prospects for a victory for Joe Biden in the U.S. presidential election continued. towards investors towards safe haven.
The United States broke its daily record for coronavirus infections on Friday, prompting some states to impose partial blockades, while the number of global cases reached nearly 14 million.
“Gold prices are steadily rising as investors begin to boost their stimulus expectations on second-wave coronavirus fears,” said Ed Moya, senior market strategist at OANDA, based in New York.
Leaving the Covid-19 aside, electoral risk also weighed on American gold investors, as polls increasingly show former Vice President Joe Biden, Chief President Donald Trump, in the lead-up to the second round. presidential on November 3, Moya said.
“Wall Street can no longer ignore the polls and (has) started (priced) at the risk of a Biden Presidency,” he added.
Review of energy markets
Oil prices remained low in a weekend swoon that broke with two consecutive weeks of strong gains as investors reacted pessimistically to news that OPEC would back down on production cuts.
The New York price, the benchmark for US crude oil futures, set 16 cents, or 0.4%, on Friday at $ 40.59 a barrel.
Listed in London, the world benchmark for oil, it fell 24 cents, or 0.6%, to $ 43.13.
For the week, WTI ended almost flat while Brent showed a loss of almost 0.3%.
Investors are evaluating whether “a steady stream of pessimistic oil demand headlines will persist in the coming weeks,” said Ed Moya of OANDA, a New York-based online trading platform. “Fuel consumption is not recovering strongly.”
Sudden increases in coronavirus infections are slowing recovery from fuel use and raising concerns that it could be years before consumption recovers from the impact of the pandemic.
The United States reported at least 75,000 new cases of COVID-19 on Thursday, a daily record. Spain and Australia reported their steepest daily jumps in more than two months, while cases continued to rise in India and Brazil.
Energy calendar ahead
Monday July 20
Private estimates on Genscape’s Cushing oil inventories.
Tuesday July 21
weekly report on oil reserves.
Wednesday July 22
EIA weekly report on
EIA weekly report on
EIA weekly report on
Thursday, July 23
EIA weekly report on
Friday, July 24
Baker Hughes Weekly Survey on
Precious Metals Market Review
For the August delivery at Comex, $ 11.8, or 0.66%, settled at $ 1,812.10 per ounce on Friday.
, the real-time indicator of bullion prices increased $ 13.39, or 0.8%, to $ 1,810.56.
For the week, Comex gold rose 0.1% while bullion gained 0.6%.
Gold prices have gained approximately $ 130 an ounce, or 8%, since the week ending May 31, recovering consecutively for six weeks.
A sharp increase in stimulus packages globally to protect economies from the consequences of the coronavirus pandemic has pushed gold prices up 19.3% more in a safe haven so far this year.
US lawmakers return to Washington on Monday to discuss possible new coronavirus aid programs, while investors also watched a meeting of EU leaders in Brussels on a proposed stimulus to jump-start their COVID-affected economies.
