Oil prices hang in the balance as coronavirus crisis continues

Oil prices hang in the balance as coronavirus crisis continues

Oil futures from last week into Monday showed mixed results due to the continued rise in coronavirus cases in the U.S.

This has resulted in inconsistent pricing of crude oil and stirring up fear of lowered fuel demand. U.S. benchmark West Texas Intermediate performed better than the previous week despite a reported rise in unemployment cases due to the pandemic.

It closed Monday at $40.63 per barrel, a 2 cent decrease in price. It was previously at $40.65.

Increasing coronavirus cases

Reuters report that at least 16 states have shown unprecedented increases in COVID-19 cases, bumping up the tally of infected Americans to three million people.

This cast some doubt on the longevity of the fuel consumption boom brought about by reopened states. Despite this, however, there is no available data that shows a reduction in vehicle use in those 16 states.

Data shows that the current stable numbers are due to the fact that restrictions on travel and businesses have been eased the past couple of weeks.

The U.S. also reported a drop in its inventories of crude. This means that at the moment, demand could outweigh supply, which can also pull up crude prices in the market.

Oil prices hang in the balance as coronavirus crisis continues

The danger is still there

However, should the cases continue to increase, this could force the states to return to lockdowns or bring back restrictions. This will bring down demand for gasoline and other crude oil products, according to FX Empire.

Stephen Brennock of oil broker PVM said that “the fragile U.S. economic rebound is at risk of being undone by the latest surge in new infections,” quoted by Yahoo.

Meanwhile, Rystad Energy’s Louise Dickson stated that “If this trend continues, oil demand in the region is at risk.”

On the other side of the world, China’s economy is recovering and is set to be a healthy bull market.

In Germany on the other hand, recovery is expected to be sluggish, according to their economic data.

While this is all happening, the Saudis are demanding compliance, taking “[…]a muscular approach in warning OPEC+ participants to maintain compliance with the production cut agreement,” according to Stephen Innes, AxiCorp’s Chief Global Marketing Strategist.

Images 1 & 2 courtesy of Pixabay/Pexels

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