Crude Oil Prices Rise Despite String of Bearish Factors

By Adedapo Adesanya

Oil futures finished higher on Thursday despite persistent pressure from bearish factors like rising cases of COVID-19 and slowing economic recovery which means weaker energy demand.

The international benchmark futures, Brent crude, gained by 0.19 per cent or 8 cents to trade at $41.84 per barrel while the US benchmark West Texas Intermediate (WTI) crude futures rose 0.78 per cent or 33 cents to $40.24 per barrel.

Demand and economic outlook due to the coronavirus resurgence have prompted a rally in the US dollar as investors turned to safer assets, adding pressure to oil prices. A stronger dollar makes oil, priced in US dollars, less attractive to global buyers.

Both benchmarks got a little support slightly after government data showed US crude and fuel stockpiles dropped last week, but it had initially not held to this when the data was released but with many bearish factors, the commodity found support with this.

The Energy Information Administration (EIA) reported that crude inventories fell for a second straight week, by 1.6 million barrels for the week ended September 18. That was much less than the average forecast of a decline of 4 million barrels, but the American Petroleum Institute (API) on Tuesday had reported an increase of 691,000 barrels.

Circumstances turned bearish after data showed US business activity slowed in September, the country’s Federal Reserve officials noted concerns about a stalling recovery while Britain and Germany imposed restrictions to stem new coronavirus infections.

Europe is now grappling with a second wave of coronavirus infections that could once again wreak significant damage on the region’s economy.

There had been more than three million confirmed infections in Europe with countries seeing daily cases rise above the 10,000 mark, meaning more restrictions will follow. For instance, in the United Kingdom, the government announced on Tuesday that pubs and restaurants needed to close early and people should work from home if possible, rather than commuting to the office.

On the supply side, the market remains wary of a resumption of exports from Libya, although it is unclear how quickly it can ramp up volumes. Libya’s National Oil Corp (NOC) seeks to boost output to 260,000 barrels per day by next week.