Crude market: Oil rises due to soaring equities

Cornelia Mascio
Ottobre 18, 2020

The committee will next meet on October 19.In the most recent JMMC meeting on September 17, Saudi Energy Minister Prince Abdulaziz bin Salman said he's secured commitments from OPEC+ compliance laggards to make good on their pledged crude production cuts by the end of December.Oil demand hit hard by the coronavirus pandemic, will shrink 9.5 million b/d in 2020, and rebound by 6.5 million b/d next year to 96.84 million b/d, according to the latest report, which is slightly lower than 96.86 million b/d from last month's report.

Oil markets climbed for a third day despite a resurgence in COVID-19 infections across Europe potentially denting fuel demand. Even as equities whipsawed on pandemic worries, oil stayed higher, buoyed by expectations that OPEC could staunch a supply glut. Wall Street's main indices opened higher on Wednesday, supported by heavyweight technology stocks.

Crude also fell as the dollar was headed for its best week of the month on Friday, as surging coronavirus cases and stalled progress toward United States stimulus had nervous investors seeking safe assets.

"Between the dollar, the EIA and the warning from the IEA that may impact future OPEC policy, the tone has turned bullish here", said Bob Yawger, director of energy futures at Mizuho in NY.

Prices had traded lower earlier in the session after applications for US state unemployment benefits unexpectedly jumped last week to the highest since August, boding poorly for a sustained recovery in demand.

An Energy Information Administration report showed domestic crude supplies fell by almost 4 million barrels last week, while distillate inventories tumbled by the most since 2003.

OPEC+ is set to ease its current supply cuts of 7.7 million barrels per day (bpd) by 2 million bpd in January.

The bearish demand outlook and rising supply from Libya may mean OPEC+ could roll over the existing cuts into next year, OPEC+ sources said on Thursday.

OPEC+, a grouping of the Organization of the Petroleum Exporting Countries and allied producers including Russian Federation, fear a prolonged second wave of the pandemic and a jump in Libyan output could push the oil market into surplus next year, according to a confidential document seen by Reuters, a much gloomier outlook than just a month ago.

"While the 3Q20 recovery in some economies was impressive, the near-term trend remains fragile, amid a variety of ongoing uncertainties, especially the near-term trajectory of COVID-19", OPEC's report said of the economic outlook.

Oil prices were trading up on Tuesday afternoon before the API's data release, despite industry reports from the IEA and OPEC that suggested oil demand growth could be weaker than anticipated.

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