Oil Market Outlook
Oil prices advanced last week on strong US economic data, which offset concerns about the jump in coronavirus cases and new restrictions in states including California, Texas and Florida.
Prices also gained support from a big drop of 7.2 million barrels in US crude inventories, reflecting higher refinery run rates and lower imports from Saudi Arabia.
West Texas Intermediate (WTI) crude rose $2.16 to close at $40.65 per barrel. Brent climbed $1.78 to $42.80 and Dubai crude averaged $42.85. Thaioil forecasts that WTI this week will trade between $37 and $42, and Brent between $42 and $45. Prices are expected to remain stable as the market gains support from rising demand as more countries ease lockdowns. Among the factors expected to influence trade:
Data in the US and China show economic activity is continuing to pick up, which bodes well for oil demand. In the US, the ISM manufacturing purchasing managers’ index (PMI) rose to 52.6, the highest number in a year. Another report showed profits of Chinese industrial firms increased by 6% year-on-year in May or $82.3 billion, the first increase in six months.
Investors are monitoring progress toward a vaccine against Covid-19, which would reduce the need for lockdowns should more cases emerge. US-based Pfizer Inc and BioNTech of Germany last week disclosed early positive data from their clinical trials.
Despite optimism about virus containment in many countries, the WHO says others may need to impose lockdowns to curb the spread. The number of Covid-19 cases in 22 Middle Eastern countries has now exceeded 1 million with 25,000 deaths.
Libya’s National Oil Corp says force majeure remains in place on oil exports pending the reopening of ports after a six-month blockade by eastern forces. Libyan oil output in June plunged to 100,000 barrels per day, from an average of 1.1 million bpd in 2019.
Based on current oil prices, analysts project the US rig count will increase in the second half of 2020. A survey by the Dallas Federal Reserve indicates producers believe that if prices stay between $36 and $45, they would consider restarting production. For now, the oil and gas rig count remains at an all-time low of 263, down by 73% from this time last year.
US crude inventories have dipped to 533.5 million barrels, down from an all-time record of 540.7 million set in mid-June, but remain 15% higher than the fiveyear average for this time of year.
Economic indicators to watch include US nonmanufacturing PMI, Chinese June consumer prices and euro-zone May retail sales.