By Barani Krishnan
Investing.com - Oil markets began August trading on an ebullient note, rising 2% on encouraging U.S. manufacturing data and bets by market bulls that demand for crude will survive a rollback in output cuts by OPEC.
“Crude prices are rising after a plethora of manufacturing surveys showed the economic recovery continues despite the resurgence of the virus,” Ed Moya, analyst at OANDA in New York, said, referring to Institute of Supply Management’s Purchasing Managers’ Index data for the U.S. that came in above market expectations.
“Crude remains steady in its range on improving economic data globally, optimism the US hard-hit second wave states are on the other side of the virus, and expectations OPEC and friends will hold back from flooding the markets again," Moya said. "Oil is higher on the day but still strongly trapped in a range. As OPEC + opens up the taps, the pickup in crude demand has somewhat disappointed and that should keep oil prices grounded for the rest of the summer.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, debuted August with its strongest performance in more than a week, settling up 74 cents, or 1.8%, at $41.01 per barrel. It finished July up by a marginal 0.4%, although that was its third straight positive month.
London-traded Brent, the bellwether for global crude prices, closed the New York session up 63 cents, or 1.4%, at $44.15.
The Saudi-led Organization of Petroleum Exporting Countries is due to restore 2 million barrels of oil a day to world markets under the terms of its deal on output restraint with non-member allies steered by Russia. That's coming at a time when the rebound worldwide in fuel demand is under threat from a second wave of Covid-19.
White House Coronavirus Task Force senior expert Dr. Deborah Birx told CNN over the weekend that the pandemic was "extraordinarily widespread" in the United States, prompting an angry rebuke from President Donald Trump who tweeted that she “took the bait” of opposition Democrats and was “pathetic.” More than 4 million Americans have been infected and another 150,000-plus have been killed by the virus.
Some analysts also warn that there might be another swing in U.S. crude stockpiles data this week.
The EIA reported two 7-million-barrel draws and one 10 million barrel slump in July versus two builds of nearly 5 million. Both the declines and increases were way above levels forecast by analysts.
With the previous week’s data showing an outsize draw, this Wednesday’s EIA release for the July 27-31 week could come up with a huge build, they say.