Oil holds steady as virus concerns weigh on demand hopes

Marco Green
July 31, 2020

Even though experts agree that the likelihood is zero, USA president Donald Trump on Thursday tweeting that the November presidential elections should be delayed to ensure safe voting during the Covid pandemic caused panic among traders and a corresponding loss in oil prices. U.S. West Texas Intermediate (WTI) crude futures settled down $1.35, or 3.3%, at $39.92 a barrel after falling 5% earlier in the session. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10.

Brent crude futures settled at US$43.75 a barrel, up 53 U.S. cents or 1.2 per cent.

On Tuesday, both U.S. and United Kingdom crude futures' prices ended the day broadly lower as USA lawmakers were wrangling over another set of trillion-dollar stimulus package, while worries over a rise in global pandemic outbreak had been denting demand outlook.

USA crude oil inventories fell by 10.6 million barrels last week to 526 million barrels, the Energy Information Administration (EIA) said, the largest drawdown since December.

"Genuine price support comes from the weak dollar, which helps physical oil demand", said Tamas Varga, an analyst at PVM Oil Associates Ltd.

"We now only rarely hear talk of V-shaped demand recoveries and extremely tight markets, the views that allowed Brent to rally beyond Dollars 40/bbl", Standard Chartered said.

Crude oil prices are trading 2.5% lower today as the number of new COVID-19 cases hits a new daily record.

Globally, the economic outlook has dimmed again, with increasing coronavirus infections raising the risk of renewed lockdowns and threatening any rebound, according to polls of over 500 economists globally.

Weaker refining margins around the world, lower Chinese oil demand and high crude inventories are putting further pressure on oil prices, Lohiya said.

The drawdown was likely a result of supply cuts by the Organization of the Petroleum Exporting Countries and its allies, which were agreed-upon in April, finally being realized in fewer shipments.

The group, known as OPEC+, collectively plans to increase production from Saturday, adding about 1.5 million barrels per day to global supply, after slashing output in the wake of the pandemic.

Other reports by Click Lancashire

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