Crude oil prices plummeted on Friday morning as the resurgence of COVID-19 picked up globally, especially in the world’s largest economy and consumer of crude oil (United States), dampened the optimism for strong demand in energy goods.
Brent crude futures lost 0.70% to trade at $42.84 a barrel at 4.30 am Nigerian local time, and the West Texas Intermediate also dropped 0.8%, to trade at $40.31 a barrel.
Quick fact: Both International benchmarks for crude oil gained more than 2% yesterday, triggered by positive macros coming from the U.S Job report and falling U.S. crude inventories. For the week, Brent crude is up 4.3% and WTI is up 5.6%.
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Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the lingering concerns about the world’s largest consumer of crude oil. He said:
“The demand concerns continue to linger amid a rise in gasoline stockpiles as the number of confirmed coronavirus cases in the US climbed to an all-time high of more than 50,000 on Thursday.
“And as significantly, the infection curve rose in 40 out of 50 states in a reversal that has mostly spared only the Northeast. Indeed, faltering re-opening of US States as Covid-19 cases rise remains the primary thorn in the oil bulls’ side.
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“But worrisome for oil prices are the densely populated southern US states that have been ravaged by the virus and are among the US’s most weighty consumers of gasoline.
“With the latest state government health advisory imploring Sun Belt citizens to restrict movements coupled with the re-imposition of localised lockdowns, there is a detectible level of uncertainty in the oil market heading into what is traditionally one of the busiest driving weekend of the year, the July 4th celebration weekend.”
However, some oil traders and investors remain optimistic that the price of crude will maintain its bullish momentum in the midterm, as long as certain parameters are kept in place.
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“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery,” ANZ Research said in a note.
“The recovery in gasoline demand will plateau until the U.S. economy improves,” it concluded.
