Oil futures rose cautiously on Monday, buoyed by some recovery in energy demand, even as COVID-19 cases exceed 10 million worldwide, raising the possibility of new closings in parts of the world. world to contain the spread.
“As global demand recovers, the natural inclination for oil is to increase as current prices are below the economic threshold for most producers,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch.
The market saw optimistic economic data over the weekend from China, the world’s largest importer of crude oil. Industrial gains in China in May increased 6% from a year earlier, representing the first increase in 2020, official statistics released over the weekend showed.
There are also signs of further slowdowns in oil production. “To summarize the point of view of US producers, the number of domestic rigs is down 73% from last year,” so oil has resumed its upward trend, Raj said.
Still, “the biggest spoiler last week was the recovery in US oil production at 500,000 barrels per day,” the Energy Information Administration reported, he said. “Traders now fear that at least some of the closed wells … may recover quickly and spoil the recent recovery.”
West Texas Intermediate Crude Oil for August CLQ20,
It picked up 64 cents, or 1.7%, at $ 39.13 a barrel on the New York Mercantile Exchange, after a weekly decline of 3.4% for WTI listed on Friday.
Brent world reference oil for delivery in August BRNQ20,
It rose 15 cents, or 0.4%, to $ 41.17 a barrel on ICE Futures Europe, after posting a weekly decline of 2.8% on Friday, according to the most active contract deals. The August contract expires at the end of Tuesday’s session.
Meanwhile, concerns about the need to redeploy efforts to prevent the spread of the pandemic, and the likelihood that movements will slow recovery from oil demand, have increased along with cases of the disease. The United States leads the world with a COVID-19 case count of 2.55 million and a death toll of 125,803, more than double the 1.34 million cases and 57,622 deaths recorded in Brazil. Within the U.S., infections have increased in 32 states in the past 14 days, according to a New York Times tracker, with California, Texas and Florida leading the way.
Also contributing to negative sentiment in the oil market was the bankruptcy filing of Chesapeake Energy Corp. CHK,
on Sunday. The defeat of the price of oil and gas fueled by the coronavirus pandemic dealt a powerful blow to the United States pioneer in a unique oil extraction technique that would come to change the balance of oil production in the world.
“Chesapeake was the undisputed master of American shale gas,” Magnus Nysveen, chief analyst at Rystad Energy, wrote in a report Monday.
“The enormous financial burden of investing first in the shale gas boom, then his failed attempt to grow a similar strong position in the oil games, has brought the giant to its knees,” he supposed.
Separately, Artem Abramov, head of oil shale research at Rystad, said that “a significant portion of the light oil supply in the United States is now controlled by super majors and big independents with access to the central surface and solid balance sheets.” Most of these companies “can gradually adapt even if the $ 35-40 WTI oil prices stay longer.”
Back at Nymex, prices for petroleum products were higher along with oil, before the expiration of the July contract in Tuesday’s deal. Julio gasoline RBN20,
rose 1.7% to $ 1.1727 per gallon and July of HON20 heating fuel,
increased 2.6% to $ 1.1659 per gallon.
Read:AAA expects cheaper summer gasoline prices since 2016
August of natural gas NGQ20,
it was trading at $ 1,714 per million British thermal units, up 11%.
“Natural gas markets are primarily responding to weather forecasts as the expectation of warmer days ahead provides a boost to prices that are at multi-year lows,” Raj said.
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