Oil prices increase despite surges in coronavirus infections

A pumpjack stands in Midland Texas U.S. on Friday Aug. 24 2018

Chinese official recently expressed "strong dissatisfaction" with USA sanctions that came in response to a new national security bill on Hong Kong, warning that crossing "red lines" and meddling in what China considers its own internal affairs could put the trade deal at risk, The Wall Street Journal first reported on Friday.

There are fears that a spike in Covid-19 infections in southern USA states could stall the demand recovery, especially as some of those states, such as Florida and Texas, are among the biggest gasoline consumers. In the worst-case scenario, the crude oil markets could retrace 50% to 61.8% of the first rally. Brent crude rose 74 cents, or 1.8%, to settle at $41.05 a barrel. Furthermore, there are renewed worries over a possible increase in US crude oil production now that prices have recovered even though crude stockpiles are sitting at a record high.

On the demand side, oil prices posted more than 1.8% gains on Thursday and have continued their increase on Friday as news reports suggest that global oil consumption is picking up with the start of the summer season.

'As part of that process, we have been reviewing our price assumptions over a longer horizon.

The country's oil import spending declined to just $ 2.3 billion in May, from $ 9.5 billion in May past year.

This current oil bust is different, however, because there are so many unknowns with the pandemic, said Jennifer Rowland, a senior energy analyst at Raymond James. Economists had expected a 2.5% increase. "But we're in completely uncharted territory because this is virus-driven". If businesses are allowed to remain open and if consumers aren't scared off, oil demand will likely show little change.

The rising number of cases and hospitalization rates in the US have yet to affect oil prices, but they could depress them again, said Rystad Energy, a Norwegian research company. If we see the Covid-19 upticks level off, the oil market could test $65, but that is still a big if. "But on a trading floor, a concern does not always translate into a problem, until it becomes one".

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