WHO Says “Worst is Yet to Come”
June 30, 2020
Crude oil and refined fuel product prices rose yesterday, mainly driven by signs of recovery in world economies and consumption. The oil rig count in the United States is very low and U.S. shale production keeps falling. Keeping prices from rallying higher are the continued concerns about Unites States fuel demand due to increasing cases of COVID-19. Texas, California, and Florida are restricting some bars and restaurants.
OPEC cut its oil output in June by 1.25 million bpd from May levels. The cartel is working to implement a supply cut agreement with Russia and other allies. OPEC and its allies agreed to cut production by 9.7 million bpd from May 1. Petrologistics reports that OPEC supply remains about 1.55 million bpd away from full compliance, excluding Iran, Libya, and Venezuela.
WHO & Fed Sound Caution
The reports and the statistic are all over the board when it comes to coronavirus. The World Health Organization warns that the worst is yet to come. Fed Chairman Jerome Powell is scheduled to testify before the House Financial Services Committee today. Powell will warn the committee that the road ahead is “extraordinarily uncertain.” Powell says the government measures to provide relief will need to remain in place “for as long as needed.”
The Wall Street Journal reports, “U.S. crude’s 94% advance this quarter put oil on track for its most significant quarterly percentage gains in 30 years.” Some market observers say coronavirus fears are not hurting demand. China’s crude imports of oil were up 19.2% on the year to an all-time high at 11.34 million bpd. India is also seeing demand return faster than it expected. Bloomberg reports India is seeing demand return to normal ahead of projections. India’s Oil Minister Dharmendra Pradhan said at the Bloomberg NEF summit, “If you look at the trend of the past few weeks, I’m confident that by the end of the second quarter, demand will be as usual. At the end of June, we have already achieved 85% of our demand compared to June 2019.”
WTI crude oil futures traded between $35 and $41 dollars over the last 20 trading days. The battle between good economic news, which support demand, and the news of rising COVID-19 cases, which, hurt demand, continues. Crude could likely trade in this range until there is a clearer picture going forward.