Could Viral Concerns Halt Economic Recovery?
July 27, 2020
The virus continues to top the news and the threat of lockdowns and the economic implications doesn’t seem to be damping the equities markets efforts to trade higher. Bloomberg reports that cases are rising in China and Spain again showing the difficulty to stamp it out. In India the epidemic is now the fastest growing in the work with cases increasing 20% to 1.4 million over the last week.
Many experts think the bottom line in the COVID-19 virus outbreak is that if the cases are not contained soon then investor sentiment will take a hit and the outlook for the economic recovery will be revised much lower and that will be bad for fuel demand and prices. However, if the news about a vaccine continue to show progress and moves forward then oil and fuel prices will also continue upward with demand.
Baker Hughes reported Friday that 1 crude oil rig came online, and that the US total is up to 181. Last year at this time there were 776 total crude oil rigs in operation. The rally in crude prices brought the one rig back into operation.
The market is getting a bit more geopolitical tension to add into the mix offering support to prices. China and US relations. Iran story below and Russian activity in Libya.
China ordered the closure of the US consulate in Chengdu in retaliation of the US closing the China consulate in Houston. If US and China trade tensions increase this will be bearish for oil demand.
Iran said a US fighter jet harassed an Iranian civilian airline in an act of terrorism which injured and panicked passengers, dismissing a US account that the jet was merely conducting visual inspection.
The Wall Street Journal reported that military contractors with links to the Kremlin have seized control of two of Libya’s most extensive oil facilities in the last few weeks. This action has increased tension between the US and Russia as Russia’s influence and control grown in that nation.
The energy market is still stuck in a trading range and with so much uncertainty there is no clear direction.