Front-month NYMEX WTI fell back below $40/b for the first time in a week July 9 as demand fears continued from rising coronavirus cases and as Wall Street suffered falls in the stock markets.
Although global crude demand has been slowly rising and US jobless claims have fallen, there have remained concerns that increasing coronavirus cases in the US and worldwide could put a halt to any progress. The inventory report from the US Energy Information Administration on July 8 showed rising US crude stocks amid falling oil exports, even though falling gasoline storage volumes helped offset the bearish news.
NYMEX August WTI was down $1.28/b and settled at $39.62/b on July 9, and ICE September Brent dipped 94 cents to $42.35/b.
"Many energy traders might be growing cautious with the demand outlook after yesterday's EIA oil inventory report showed exports fell ... to the lowest levels since November," said Edward Moya, senior market analyst with OANDA. "Oil seems ripe for a pullback here and, if the demand outlook shows further signs of faltering, WTI could settle back towards the mid-$30s."
Moya also noted that Libya's Messla oil field has restarted and ramped up production faster than expected after it was shut down because of a blockade by armed forces since January.
"Oil prices slumped after both Libya's Messla oil field disruption ended and on fears that crude demand recovery will falter as the coronavirus impact will be much worse than expected in America," he added. "Crude prices have been stubbornly stuck around the $40 level, but that might not last as chinks are emerging with the supply-and-demand-side outlooks."
On economic news, the Dow Jones Industrial Average dropped by more than 300 points July 9, and US jobless claims fell to 1.31 million in the week ended July 4, according to the Labor Department, which was a bit lower than consensus estimates but still the 16th straight week above the 1 million mark.
As for refined products, NYMEX August RBOB fell by 4.04 cents/gal to $1.2505/gal and August ULSD dropped by 1.05 cents/gal to $1.2239/gal.
Coronavirus woes
Rystad Energy oil markets analyst Louise Dickson noted that coronavirus cases continue to rise in the US, Brazil and many OPEC+ nations.
"As the US, Brazil and other countries continue to get hammered by COVID-19, demand is at stake," Dickson said. "If it becomes more evident a second wave of COVID-19 will have a negative impact on oil demand, OPEC may step in to decide to keep deeper cuts into August, instead of increasing the group's production by a planned 2 million b/d."
The next OPEC joint ministerial monitoring committee meeting is slated for July 15 and, thus far, OPEC+ has maintained a 106% compliance rate through June, according to the S&P Global Platts OPEC+ survey. OPEC's production volumes are currently the lowest since the Gulf War in 1990, and longtime compliance violators Iraq and Nigeria are trending closer to their goals.
