Rising COVID-19 Cases Worry Traders
July 17th, 2020
Crude prices closed lower in yesterday’s trading and was driven lower by a decline in equities, poor retail sales from China and the rising cases of COVID-19 and the OPEC+ plan to ease back production cuts.
The rising cases of the coronavirus continue to raise concerns among traders that another round of lockdowns will slow energy demand. As more restriction are being put in place the fear grows that a second wave of the virus maybe on its ways. Also, a concern for economic recovery is the end of the stimulus payments at the end of the month with no new bill in place yet. As the week has gone on the virus news continues to report rising cases numbers and that adds pressure to energy prices. On top of that the market got the OPEC+ news this week that they will add more barrels to the market starting in August. But there are signs that global oil stocks are being whittle down and US crude oil production and stocks continue to decline. Also offering some support for prices is the positive news about a potential vaccine. Obviously, any positive news about a vaccine is big news and get a lot of attention. Currently there are several companies getting good coverage about progress being made on their pursuit of a vaccine and some are saying a possible vaccine could be here by the fall an others in early 2021. Any positive news that hits the headlines on this topic gets traders attention and adds support and buying to the markets.
The energy market continues to congest and trade in a range as the uncertainty is high and there is not a clear direction to this market. There is no trend as daily trading ranges shrink and the market is just wallowing around. Over the last thirty trading days WTI crude oil has been in the roughly $35 to $41 dollar per barrel range. RBOB have been in a roughly twenty cent range from $1.10 to $1.30. ULSD has been in roughly a fifteen cents range from $1.10 to $1.25. As of right now the energy market should provide us more of the same as the uncertainty continues.
Fitch said the tapering of the OPEC+ cuts from August reflects the recovering oil demand and should support a gradual market rebalancing, which may help reduce price volatility. It expects OPEC+ to continue to periodically adjust its two-year deal reached in April to avoid large production surpluses or deficits. It assumes oil demand will return to 2019 levels by the end of 2021, absent a second wave of lockdowns. Fitch also stated that it expects OPEC+ to reduce its quotas if demand recovery reverse. It expects Brent to average prices to improve from $35 per barrel in 2020 to $45 per barrel in 2021 and to $53 in 2022.