Oil prices mixed as coronavirus cases rise again

Andrew Cummings
July 8, 2020

In an energy price forecast released Monday, accounting firm Deloitte also makes note of the oil demand recovery and predicts Brent crude prices will rise from an average of US$39 per barrel this year to US$46.50 in 2021 and US$64 in 2023.

London-traded Brent, the global benchmark for oil, slid 2 cents to settle at $43.08.

U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 17 cents, or 0.4%, to $40.46 a barrel at 0340 GMT.

Both benchmarks are set for a fourth session of daily percentage changes of less 1 per cent in either direction.

Oil prices settled little changed overnight as demand concerns due to a new surge in coronavirus cases overshadowed U.S. government forecasts for lower production.

Crude oil inventories in the United States are expected to increase by around 2.05 million barrels for the week ending July 3, according to the American Petroleum Institute's (API) estimate on Tuesday.

Whereas supply and demand used to balance out at around 100 million bpd per year, now record shut-ins and Covid-19 demand destruction in July brings total liquids demand in July to 89 million bpd and total liquids supply at around 88 million bpd, hence a new "balance at the bottom" at US$40/bbl.

"Yesterday's lull in price action in the oil market is continuing this morning even as sentiment is sullied by renewed U.S. glut fears.the search continues for a catalyst to break oil out of its range", said PVM analysts in a note.

The Energy Information Administration is expected to report inventories of the motor fuel rose by 550,000 barrels, while nationwide crude inventories dropped by 3.25 million, according to a Bloomberg survey.

"Although a record production cuts by Saudi Arabia and other OPEC countries+ support the idea of stronger differentials, it again will not be welcome news for oil companies, helping them a little margin, which is already under significant pressure", said ING Bank.

Key ministers of the OPEC+ are due to hold talks next week.

The latest surge in USA coronavirus cases, taking the US total above 3 million, has reduced hopes for a swift recovery in oil demand which has been hammered by the global lockdowns to prevent the virus spreading.

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