The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
Oil prices sank on Thursday following poor U.S. economic figures and after U.S. President Donald Trump roiled markets with a suggestion that the nation should delay its November presidential election.
Investors sold riskier assets following Trump’s tweet that raised the prospect of delaying the vote. The date of the U.S. election is enshrined in the U.S. Constitution, but Trump’s remarks were viewed as an attack on the integrity of the coming election, worrying investors.
Oil markets recovered from their lowest levels of the selloff. 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.
Brent crude futures, which expire on Friday, fell 81 cents, or 1.9%, to $42.94 a barrel.
“We have the potential for serious political uncertainty in the U.S. if election dates are challenged,” said John Kilduff, partner at Again Capital in New York.
In a sign of the devastating impact of the coronavirus on the United States, the world’s biggest oil consumer, the country’s economy contracted at its steepest pace since the Great Depression in the second quarter.
U.S. gross domestic product collapsed at a 32.9% annualised rate, the deepest decline in output since the government started keeping records in 1947. In addition, weekly jobless claims rose, a signal that the worsening outbreaks across wide swathes of the United States are taking a further toll on the economy.
Deaths from COVID-19 have now topped 150,000 in the United States, while Brazil, with the world’s second-worst outbreak, set daily records of confirmed cases and deaths. New infections in Australia hit a record on Thursday.
The potential threat to a recovery in oil demand comes as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are set to step up output in August, adding about 1.5 million barrels per day to global supply.
“The market is now watching U.S. producers and OPEC+ consider plans to ramp up while demand isn’t returning the way we thought it would a few weeks ago...the supply demand balance could get out of whack” said Gene McGillian, vice president of market research at Tradition Energy.
Oil rises further from three-week lows, but headwinds loom amid pandemic.
Oil prices recovered further ground on Friday, after touching three-week lows in the previous session, responding to a record decline in U.S. growth as the coronavirus ravaged the world’s biggest economy and oil consumer.
Brent crude was up by 14 cents, or 0.3%, at $43.08 a barrel by 0358 GMT. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10.
U.S. crude gained 21 cents, or 0.5%, to $40.13 after dropping 3.3% the previous session, again recovering from lows not seen since July 10.
That leaves Brent on track for a fourth month of gains, while U.S. crude is heading for a third consecutive month of increases, as the contracts have recovered from the depths reached in April when much of the world was in lockdown.
But as a second wave of infections rages around the world, the threat to oil demand is becoming apparent.
“The equilibrium price may be lower,” said Michael McCarthy, chief strategist at CMC Markets. “Now that we have dealt with the issues around the OPEC+ grouping, we know what’s happening there, the key issue for oil markets is demand destruction.”
OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively plan to increase production from Saturday, adding about 1.5 million barrels per day to global supply.
Globally, the economic outlook has dimmed again, with increasing coronavirus infections raising the risk of renewed lockdowns and threatening any rebound, according to Reuters polls of over 500 economists globally.
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Oil Future close 30th July, 2020 |
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Brent crude: |
$ 42.94 (-0.81) /brl |
FM delivery Sep |
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Light crude (WTI): |
$ 39.92 (-1.35) /brl |
FM delivery Sep |
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Gasoil ARA; |
$ 360.25 (-17.00) /mton |
FM delivery Aug |
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NY Harbor Ulsd: |
$ 373.10 (-12.74) /mton |
FM delivery Sep (New FM) |
Oil Futures trading at GMT 05.13; Brent: +$0.22, WTI: +$0.17.
Oil Futures dropped yesterday in relatively big numbers.
Demand concerns with a rise in COVID-19 is still hampering the expected demand for oil.
Expect bunker prices to decrease, Fuel Oil based on ICE down 5-6 usd/mton, and MGO down 17 usd/mton. Fuel Oil based on NYMEX down 8-10 usd/mton and
NY Harbor Ulsd down 13 usd/mton.
Trend: The oil market is rebounding today after yesterday’s drop, but will the upward trend hold? The downward price pressure still prevails.