Positive Economic Data Lifts Oil Despite Oversupply Scare

By Adedapo Adesanya

Oil prices rose on Monday, beating worries about oversupply as positive economic data from Europe, Asia and the United States boosted gains.

Brent crude futures gained 37 cents or 0.85 per cent to trade at $43.89 per barrel, while the US West Texas Intermediate (WTI) crude futures rose 55 cents or 1.37 per cent to $40.81 per barrel.

The market had opened in the negative earlier on Monday but data showed that manufacturing activity in the United States accelerated to its highest level in nearly 18 months in July as orders increased despite a resurgence in new COVID-19 infections.

Also in Europe, a similar survey showed manufacturing activity across the eurozone expanded last month for the first time since early 2019, while positive manufacturing data in Asia also boosted oil.

Despite this, investors remained concerned about rising COVID-19 cases globally and the possibility of oversupply as members of the Organisation of the Petroleum Exporting Countries (OPEC) begins to lift supply cuts.

OPEC+ members have been cutting output by 9.7 million barrels per day since May. This month, cuts will taper to 7.7 million bpd until December, and this is a source of worry with US shale production beginning to increase.

The total number of COVID-19 cases in the world has neared 18 million, according to the latest data and this deepens worry about economic recovery.

More countries are imposing new restrictions or extending existing curbs in an effort to control the pandemic, and this may see recovering demand take a slide.

Analysts noted that as weakening demand possibly intersects with rising production, a renewed supply growth into record-high territory would appear likely.

The US continues to lead with the most cases at 4.8 million, followed by Brazil with almost 2.7 million cases, while India has the third-highest with more than 1.8 million cases.

Geopolitical tensions continue to hang over investor sentiment, with US Secretary of State, Mr Mike Pompeo, saying that President Donald Trump is set to announce “in the coming days” new actions related to Chinese software companies viewed by his administration as a national security threat.