Bunker Market this morning, 24th July, 2020
Oil falls on coronavirus demand concerns, weak U.S. jobs numbers.
Oil prices fell 2% on Thursday as investors worried the U.S. Congress may not agree on a stimulus package and as jobless numbers rose, while analysts prepared to cut energy demand forecasts as the number of coronavirus cases surges higher.
That price decline came despite the benefit of a drop in the dollar to a near 22-month low.
Brent LCOc1 futures fell 98 cents, or 2.2%, to settle at $43.31 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 fell 83 cents, or 2.0%, to settle at $41.07.
The U.S. dollar was trading at its lowest against a basket of currencies .DXY since September 2018. A weaker dollar usually spurs buying of dollar-priced commodities, like oil, because they become cheaper for holders of other currencies.
But weak U.S. jobless numbers and a surge in coronavirus cases weighed on oil prices and stock markets.
“Oil prices fell along with the stock markets on worries about a (U.S.) stimulus package, a rise in jobless numbers and a decline in energy demand – all related to the continued rise in coronavirus cases,” said John Kilduff, partner at Again Capital LLC in New York.
The number of Americans filing for unemployment benefits unexpectedly rose last week for the first time in nearly four months.
U.S. Senate Republican leaders and White House officials tried to hammer out a proposal for a fresh round of coronavirus aid on Thursday. Democratic leaders, meanwhile, rejected the idea of passing a piecemeal bill.
U.S. coronavirus cases approached 4 million on Thursday, with more than 2,600 new cases every hour on average – the highest rate in the world, a Reuters tally showed.
“The trend for COVID-19 cases will likely result in downwards revisions in demand growth forecast from key market observers soon, including ourselves and the agencies, especially for the fourth quarter,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Adding to the market uncertainty, U.S.-China relations deteriorated as Washington gave Beijing 72 hours to close its consulate in Houston after spying allegations.
The Chinese foreign ministry said the U.S. move had “severely harmed” relations and that China would be forced to respond.
Oil rises on weaker dollar, but virus woes and U.S.-China tensions weigh.
Oil edged up on Friday as the dollar fell to an almost two-year low, although demand concerns stemming from rising coronavirus cases and U.S.-China tensions kept a lid on prices.
The dollar slid to 22-month lows against a basket of currencies .DXY. A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies.
“Yesterday’s U.S. economic data showed that the economic recovery is struggling and pretty much guarantees more federal aid is coming.”
The United States on Thursday recorded over 1,000 deaths from COVID-19, marking the third straight day the nation passed that grim milestone as the pandemic escalates in its southern and western states. Globally, more than 15 million have been infected and over 620,000 have died.
While the rise in infections has fanned fears of renewed government lockdowns, worries that oil demand could be hit have been exacerbated by tensions between the United States and China – the world’s top two oil consumers.
China said the U.S. move to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, without detailing what it would do.
Washington on Tuesday gave China 72 hours to close the consulate, which it said was “to protect American intellectual property and Americans’ private information”, in a dramatic escalation of tension between the world’s two biggest economies.
Barclays Commodities Research has said oil prices could see a correction in the near term if a recovery in fuel demand slows further, especially in the United States.
The bank lowered its oil market surplus forecast for 2020 to an average 2.5 million barrels-per-day (bpd), from 3.5 million bpd previously.
Oil Future close 23nd July, 2020
Brent crude: $ 43.31 (-0.98) /brl FM delivery Sep
Light crude (WTI): $ 41.07 (-0.83) /brl FM delivery Sep
Gasoil ARA; $ 379.25 (-7.50) /mton FM delivery Aug
NY Harbor Ulsd: $ 391.20 (-2.86) /mton FM delivery Aug
Oil Futures trading upward at GMT 07.38; Brent: +$0.15, WTI: +$0.08.
The trading range for Brent and WTI from beginning of this week until today is very narrow. Brent + 3 cents and WTI + 26 cents.
Bunker prices are expected to decrease, Fuel Oil down 5-7 usd/mton, MGO down 1-2 usd/mton and NY Harbour down 5 usd/mton.
Remember, always start to predict today’s bunker price in accordance to Oil Future differentials at closing the day before. – Don’t create bunker prices from current Oil Futures, which are too new and live and changing values every split second. Use the current live Oil Future prices only as a guidance for what we can expect forward.