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'Lifeless' Oil Clings to $40s as Market Looks for Clues

Published 07/27/2020, 03:21 PM
Updated 07/27/2020, 03:38 PM
© Reuters.

© Reuters.

By Barani Krishnan

Investing.com - One wonders if it’s the same oil market that went and came back from the hell of minus $40 a barrel. But it is. And if the last couple of sessions prove anything, it is that the life has been sucked out of it.

New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up 31 cents at $41.60 per barrel on Monday.

London-traded Brent, the bellwether for global crude prices, rose 7 cents to settle at $43.41 per barrel.

Trading in WTI and Brent has been anemic since Thursday’s close in New York, with both benchmarks plodding along just a few cents in either direction on uncertainties around demand for fuel amid the raging new wave of coronavirus cases in the United States and other global hotspots.

Goldman Sachs (NYSE:GS) reinforced the notion of the market’s hapless state with a note at the weekend that said: “Following a year of unprecedented shocks, uncertainties over oil fundamentals has never been higher.”

The investment bank, one of Wall Street’s most influential voices in commodities trading, said its “bottom-up” oil forecasting model from the demand collapse of April and May shows global oil demand improvements were sharply slowing, down 60% in July relative to the May-June pace of gains.

Goldman’s “top-down” model, however, indicates monthly demand data covering 75% of global demand.

“Crude remains trapped in the low-$40s as virus uncertainty could keep demand tepid and as deteriorating relations between the U.S. and China could jeopardize the phase-one trade deal, which would diminish global demand outlook,” added Ed Moya, analyst at New York’s OANDA.

President Donald Trump’s national security adviser, Robert C. O’Brien, has tested positive for the coronavirus, the White House said on Monday, making him the most senior White House official known to have contracted the virus which has already infected some 4.4 million Americans and killed about 150,000 of them.

The U.S. economy shrank 5 percent in the first three months of 2020 for its sharpest decline since the Great Recession of 2008/09, as most of the 50 states in the country went into lockdown to stem the outbreak of the virus. While most businesses have reopened over the past two months, economists still warn of a double-digit recession in the second quarter.

Alternatively, trillions of dollars of COVID-19 stimulus passed by governments and global central banks have debased the dollar, driving it to a near 2-year low and heightened inflation fears — a situation that typically boosts prices of commodities like oil and gold, which shot to record highs on Monday.

Republicans led by Trump have finalized a fourth coronavirus relief bill, worth about $1 trillion, to provide temporary and reduced extension of unemployment benefits, another round of stimulus checks, liability protection for businesses and funding to help schools restart. It will also include $16 billion in new funds for testing and tax incentives to encourage companies to rehire employees.

Latest comments

lifeless oil. end of oil tomorrow morning. demand for oil will go to 0 in the next 24 hours. These are the headlines in a pandemic and demand has fallen. But it should be a reminder should the pandemic ease over the next few years, these will be the headlines when operators oversupply the market. When you cut US production below demand, the headlines will read much different.
Life to lifeless, to eternity
All of the markets are lifeless. They’re just propped up on greed because nobody has actual jobs any more.
merhaba <img src="https://i.hizliresim.com/OWBA0N.png" />
Merhaba [url=https://hizliresim.com/OWBA0N][img]https://i.hizliresim.com/OWBA0N.png[/img][/url]
did you just copy and paste oil for gold from your articles about how lifeless metals were last year?
Why don't you do something useful, like putting on some trades, instead of trying to pick at a story where there's nothing to debate about. You know what you are Matt? A S.O.R.E. L.O.SE.R. That's what. You're so predictable, Matt. You just can't stand it when people call out the oil market for what it is :)
from all the use, I'd say pretty full of life
 Why are you acting like a 10 year old?
flippant
 You should ask petulant Matt that question. Go look at the history of the guy's comments and you'll see his bent against me. The first time I really respond and I get called out. Ha ha ha. Listen, Jay. I'm not like the other writers on this service. I believe in responding in like. I've seen your comments. You're nothing like him, and I respect that.
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