The recent resurgence of Covid-19 infections in many parts of the world has caused not only a drop in oil prices, but growing pessimism about the prospects for oil demand. However, some recent news has reversed sentiment, with optimism that has pushed prices up again. Perhaps the most important news was that the Food and Drug Administration granted full approval of the Pfizer / BioNTech vaccine this week. Approval raised hopes that vaccine vacancy in the United States will slow now, which in turn would boost fuel demand.
In beyond good news in terms of oil, China reported zero new cases of Covid-19 this week after curbing several local outbreaks. As the world’s largest oil importer, China is a palette for oil prices, and this week the palette is pointing to higher oil demand.
A weaker US dollar contributed to the positive sentiment, as it is usually conducive to stronger oil demand, as it also did. reports of the highest refinery production in India in July. These rose by about 10 per cent a year and were accompanied by an increase in fuel demand in the country since April.
This large amount of bullish news for oil could bring about a change in the behavior of large oil traders, such as hedge funds, which have continued to sell oil futures for seven of the past nine weeks, according to the latest weekly. column on the buying and selling of oil by Reuters, John Kemp.
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Last week, hedge funds and other institutional traders sold the equivalent of about 25 million barrels of Brent and 9 million barrels of West Texas Intermediate. The Reuters market analyst noted that most sales were profitable, but about 12 million barrels were “new short-term bearish sales” in anticipation of weaker oil fundamentals in the second quarter. Since June 15, traders have sold a total of 253 million barrels of oil.
The outlook for oil demand in the second half remains mired in uncertainty. Despite rising levels of vaccination in Europe and the United States, analysts ’expectations about the removal of all travel restrictions appear to be met. According to Kemp from Reuters, most governments will likely also take the guarded path and will not rush to lift restrictions on the international movement until there is some degree of certainty that the spread of coronavirus is under control.
When this degree of certainty is reached it remains to be seen how reports they are beginning to appear in terms of an increasing number of advanced Covid-19 infections in vaccinated individuals. The addition of booster shots is a possible solution, but availability may be limited in most parts of the world.
On the other hand, as a growing number of U.S. companies begin to demand vaccines for their employees, some analysts expect a sharp rise in work-related travel in the fall.
“With many corporations and government agencies likely to enforce vaccine mandates, the return to office travel should recover drastically in the fall,” OANDA analyst Edward told Reuters this week. Moya.
Meanwhile, many will watch this week’s Fed meeting, which could produce updates on the central bank’s plans to start the stimulus program.
“While the virus remains a threat to short-term demand prospects, despite signs of an improvement in the situation in China, this week’s Jackson Hole summit may give the market some ideas about the time of time reduction, ”Saxo Bank said in a market comments Monday.
Recent comments from senior Fed officials that they should start shrinking sooner rather than later because the economy is growing strongly have contributed to the decline in oil prices. This means that any news that favors decreasing the likelihood of it happening later than before, would be bullish for prices. The possibility of this has recently increased with the number of Covid-19 infections.
By Irina Slav for Oilprice.com
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