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Oil prices rise after sharp retreat over virus fears

After a scare that a rapid rise in COVID-19  cases globally could choke a revival in fuel demand, Oil prices has inched up in price, an indication that the product was about returning to its previous benchmark before spike in the virus.

In a sharp response to decline in price by 5 percent in the previous session on worries that the virus could rise, the global oil price recorded a increase on Thursday.

While the U.S. West Texas Intermediate (WTI) crude futures rose 12 cents to $38.13 after dropping $2.36 yesterday, Brent crude futures climbed 5 cents to $40.36, after falling $2.32 a day before.

A day earlier, the benchmark contract hit its highest price since early March, just before pandemic lockdowns and a Saudi-Russian price war slammed markets and the selloff came after U.S. government data showed crude stockpiles rose by 1.4 million barrels, driving inventories to a record high for a third straight week last week.

Analyst, however, said that was mostly due to a flotilla of Saudi cargoes booked by U.S. refiners when prices slumped in March. Those shipments are due to ease soon.

On the positive side, the U.S. data showed a healthy increase in implied demand for gasoline, said National Australia Bank’s head of commodity research, Lachlan Shaw.

Gasoline supplied, a proxy for demand, jumped by 9% from the previous week, and U.S. gasoline stocks fell by 1.7 million barrels, the Energy Information Administration said, a bigger draw than analysts had expected.

However worries about a second wave of COVID-19 cases in several U.S. states, where lockdowns had eased, and a rapid spread of infections in South America and South Asia are expected to keep a lid on fuel demand.

Stephen Innes, market strategist at AxiCorp, said mobility data from Google showed driving in Texas, Florida and to a certain extent California was flatlining.

In another reminder of fuel demand woes, Australia’s flagship airline, Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.

“It highlights the reality that we’re talking years before international aviation recovers — probably three to four years,” Shaw said.

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