After being beaten in recent weeks, oil prices have been rising due to rising optimism in demand, a major disruption in production in Mexico and the first complete US regulatory approval of a COVID-19 vaccine.
October crude oil and Brent rose 3% $ 67.47 / bbl and $ 70.83 / bbl, respectively, a day after a 5% increase by both criteria, hit a seven-day streak losing after China claimed to have reduced its coronavirus cases to zero and open the port of Ningbo, one of the busiest. in the world, after a two-week closure.
About two weeks ago, China, which was the epicenter of the virus, took an uncompromising approach by imposing widespread travel restrictions and new blockades. Beijing authorities restricted public transportation and taxi services to 144 of the worst-hit areas across the country, including train and subway services in Beijing.
This seemed excessive, with less than 1,000 cases of the delta virus reported across the country and a good 61% of the population already fully vaccinated. However, Beijing opted to use its targeted blocking method which has been successful in stopping no more and no less than 30 outbreaks of Covid-19 in the past. The capital of Beijing implemented a forty-two-week quarantine for visitors to high-risk areas, stopped the use of community spaces for entertainment, and also limited the number of visitors allowed to parks and scenic areas.
Chinese authorities also urged people to cancel vacations and business trips, especially those in high-risk areas, and also advised college students to delay their return to school during the new semester.
Well, it looks like Beijing has outdone itself, once again.
“Events outside China are once again waiting for oil demand to start rising againsaid Phil Flynn, a senior market analyst at Price Futures Group Inc., on Bloomberg.
Meanwhile, a major fire against a Mexican oil rig has wiped out more than 400,000 barrels a day of the country’s production, a development that has calmed nerves with OPEC + which plans to add a similar amount to the market starting in September.
Bulk for commodities
The latest rise in oil prices also includes more signals that reinforce demand.
Over the past two days, the difference between Brent’s two closest December futures contracts rose $ 1 a barrel, while the global benchmark increased its WTI premium to the widest since April.
Meanwhile, the American Petroleum Institute (API) has reported a 1.622 million drop in crude oil stocks in the U.S., accompanied by a drop in nearly one million gasoline stocks. The API also reported a 245,000-barrel drop in distillate stocks last week, which sadly marks the smallest drop since January.
The turnaround in demand sentiment has also helped boost other commodities, with a 10% rise in the price of iron ore.
Actions of iron miners Okay (NYSE: VALE), Rio Tinto (NYSE: RIO), i BHP (NYSE: BHP) are trading at a higher level iron ore prices bounce back a spectacular collapse which saw prices fall by about 25% over the last 30 days.
Iron ore futures in Singapore have risen as much as 10% to $ 149.65 / metric, thanks in large part to the improved sentiment of all asset classes resulting from the improving situation in China, as well as a potential boost to the momentum of vaccination in the United States.
China’s central bank has said it will try to stabilize the credit supply and increase the amount of money that support smaller businesses. There are expectations of new stimuli aimed at the infrastructure, manufacturing and real estate sector after the July slowdown left the economic situation seemingly bleak.
All eyes will now be on the Jackson Hole symposium, which will be held virtually from Thursday, which is expected to provide important information on how the Federal Reserve plans to reduce the stimulus.
The dollar has recently reached a nine-month high, weighing heavily on dollar-priced products, including oil, due to rising demand for safe havens. The multifaceted strengths of the dollar have been shown once again after the release of weak U.S. retail sales data that squandered consensus estimates; Still, the greenback has gained ground against its international peers because of the Fed’s expectations to start its taper program in September.
However, Jeff Gundlach (also known as king of bonds) says it shouldn’t worry too much about volume reduction, as the Fed intends to keep rates close to zero for years to come.
By Alex Kimani for Oilprice.com
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