The combination of Hurricane Laura buoying crude prices and demand fears due to the coronavirus capping the gains informed the oil market on Wednesday once again, with Brent dipping 22 cents to $45.64 per barrel, and West Texas Intermediate rising 4 cents to $43.39 per barrel.
Tamas Varga, analyst at PVM, said of the estimated 84 percent of the Gulf of Mexico‘s offshore production being shut down in anticipation of the Category 4 hurricane, “Oil traders will be preoccupied with the hurricane today; once the danger passes, demand considerations will come into focus again.”
And yet, encouraging numbers continue to contradict the demand worries of Covid obsessed analysts: Energy Information Administration data released on Wednesday showed that U.S. crude exports last week rose by the most since February 2019 to nearly 3.4 million barrels per day (bpd); also, U.S. crude inventories fell by 4.7 million barrels in the week to August 21, compared with expectations for a decrease of 3.7 million barrels.
The EIA report also showed gasoline supplies declined to the lowest since the middle of December and refinery runs rose to the highest since March, clearly signalling an uptick in demand.
Saudi Arabia on Wednesday also reported promising news: the General Authority for Statistics revealed that although the value of the kingdom’s June oil exports was down 55 percent year on year, compared with May, total exports – including non-oil exports of goods such as chemicals and plastics – grew by 19.1 percent, or $1.86 billion (in May exports fell by nearly $12 billion).
Another country defying analytical prognostications of Covid induced demand collapse is Iran, which despite the virus and the U.S. sanctions saw its benchmark TSE index soaring 330 percent since the start of the year thanks to what Reuters calls a “breathtaking” rally in oil firms, refineries and the petrochemical industry.
However, Hasnain Malik, head of equity research at Tellimer, argued that “Local wealth is seeking a refuge to preserve some of their capital” rather than the index boost signifying economic stabilization.
Meanwhile, as the race towards releasing vaccines that will presumably end the pandemic – and alleviate trader fears – nears the finish line, Kazakhstan on Wednesday signed a deal to get supplies of Russia‘s first vaccine once clinical trials are complete; it will buy over 2 million doses initially and could later increase the volume to 5 million doses.
