By Barani Krishnan
Investing.com – Bets that U.S. economic data and road traffic numbers will get better over time is helping the oil bull, even as coronavirus infections set new records in Florida, South Carolina and Nevada.
Crude prices rose as much as 2%, front-running the expectations of those banking on an optimistic U.S. jobs report for June and better weekly demand numbers for fuel — both expected later in the week.
Assurances of free and unlimited flow of stimulus from the Federal Reserve — a long-running theme across U.S. markets — also gave oil a friendly nudge higher.
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up $1.21, or 3.1%, at $39.70 per barrel.
London-traded Brent, the global benchmark for oil, rose 83 cents, or 2%, to settle at $41.85.
The rebound, which came on the back of a higher Dow on Wall Street, almost restored the 3.2% drop on the WTI last week and the 3% lost by Brent. Those declines were deemed necessary by analysts to correct prices misaligned with fuel demand that has only just started improving from lockdowns enforced over the Covid-19. At Monday’s prices, WTI is up nearly 300% from two months ago, while Brent is up more than 170%.
The only immediate positive for oil in Monday’s trade was a report from market intelligence firm Genscape showing a modest decline of 153,330 barrels at the Cushing, Oklahoma, hub that stores crude delivered on expiring WTI contracts.
“I’m sure there’ll be plenty who are relieved at crude floating around the $40 mark, but I don’t expect it will linger around these levels too long,” said Craig Erlam at New York-based trading platform OANDA. “Between agreements expiring and economies heading in various directions, depending on the viciousness of phase two, oil prices will likely remain highly volatile for some time to come.”
Florida counted 9,585 new cases on Saturday, followed by 8,530 on Sunday, the New York Times reported. Governor Ron DeSantis said young people ignoring social-distancing rules were the main culprits in spreading the virus.
In Texas, the largest oil refining state, Governor Greg Abbott shut bars back down and cut restaurant capacity to 50%. He also shut down river-rafting trips, which have been blamed for a swift rise in cases, and banned outdoor gatherings of over 100 people unless local officials approve.
In Monday’s market, however, crude bulls tried to shut out any noise associated with the virus, focusing instead on upcoming data such as the U.S. jobs report for June, due on Thursday. A consensus of analysts tracked by Investing.com shows that U.S. non-farm payrolls may have increased by as much as 3 million this month versus May’s growth of 2.5 million.
Market bulls are also betting that refiners would have drawn down more crude last week to process into fuel in anticipation of higher demand from Americans embarking on road trips for the July of 4th celebration this week. The U.S. Energy Information Administration will report on Wednesday supply-demand numbers for the week ended June 26.
In the previous week to June 19, the EIA reported a surprise 1.4 million-barrel build in crude stockpiles, versus the 300,000 barrel rise anticipated by forecasters.
On the fuel demand side, gasoline stockpiles declined by nearly 1.7 million barrels, about 400,000 more than expected. But to offset that, distillates inventories, led by diesel, rose nearly 250,000 barrels against a forecast drop of 620,000.
U.S. crude production also rose by a surprise 500,000 barrels during the week to June 19 to 11 million barrels per day, It was the first rise in U.S. production in 13 weeks, and comes after a 20% drop in output that followed the demand destruction for fuel caused by the coronavirus pandemic.
Oil Rallies as Bulls Bet on Demand, Despite Virus Threat