Adedapo Adesanya
By Adedapo Adesanya
Oil prices recovered some of their previous day’s losses as traders banked on signs of a marginal improvement in the US economy, though rising cases of COVID-19 in some states weighed on gains.
The Brent crude rose by $1.17 or 2.9 percent to trade $41.48 per barrel, while the US West Texas Intermediate (WTI) crude was sold at $38.72 per barrel after appreciating by 71 cents equivalent to 1.87 percent.
At the previous session, major crude prices lost five percent as the US recorded a high inventory of 1.4 million barrels, exceeding analysts’ expectations, the Energy Information Administration (EIA) said, citing rising production.
On Thursday, prices found support on the back of data which showed fewer Americans filed for unemployment benefits last week and orders for key capital goods rebounded in May.
This is especially good as it shows good purchasing power for essentials which include fuel, which interprets but an extension to better demand for crude.
However, the decline in jobless claims was less than analysts expected and other data support economists’ expectations that the US GDP could shrink at as much as a 40 percent annualized rate in the second quarter of the year.
However, analysts believe that prices could be restricted in the coming days by increasing virus cases around the world.
New infections have surged in US states while Australia posted its biggest daily rise in cases in two months. As the virus spikes again in the US and other areas around the world, some governments imposed new restrictions only weeks after lifting shutdowns, even as other areas relaxed them.
Although attention has started shifting away from the Organization of the Petroleum Exporting Countries and its allies known as OPEC+ agreement to extend a global cut of 9.7 million barrels a day to the end of July, investors are waiting to see if the producers can further extend their record cut beyond July.
It is still not clear if OPEC and its allies are willing to extend production cuts into August, but the group at a meeting held last Thursday said it would review its output reductions monthly, with the next technical committee meeting set for July 15.
Analysts also noted that a record rise in global coronavirus cases poses a huge worry for the recovery in fuel demand, which is still making improvement and adjustment.
The economic damage associated with a new round of COVID-19 countermeasures will likely not bear any positive news and will be bad for oil prices.
The record crude supply cut by the cartel and its allies has kept the oil market much stronger than in April when Brent hit a 21-year low below $16 per barrel and US WTI crude turned negative.
