Rystad Energy’s daily market comment from our Head of Oil Markets Bjornar Tonhaugen

Brent has not suffered a fatality, although its extremely narrow $2 trading band so far this month suggests it barely has a pulse.

This morning, benchmark oil futures are trading higher. Brent is attempting to breach its highest closing price of $43.79 as European traders wake up to the news that EU leaders have reached a deal on the recovery fund and mechanism to help rebuild the European economy from the worst economic recession since WWII.

Although the €750bn deal will not immediately boost oil consumption, it will provide important support for the bloc’s medium term oil demand prospects, via additional economic growth.

Even though traders were aware of the negotiations since Friday, agreeing on a deal always provides the extra optimism for a positive market reaction. 

Otherwise in the market, it’s so quiet. However, quiet before the storm, we believe. Oil prices would already have been higher now, if it wasn’t for the renewed surge in cases in the US.

Why? The global crude market is in deficit to the tune of 3.2 million bpd in July, and even with a tapering of OPEC+ cuts in August, will remain in deficit in August and September too of around 2.5 million bpd.

So the threat of a second wave of lockdowns is holding oil price gains back. An outright second wave of lockdowns will send oil prices lower.

That’s where we are today while waiting for clues about the US crude supply-demand balance for this week due to be reported unofficially by the API later today and officially by the Department of Energy (DOE) tomorrow.

In other news, the supermajor, Chevron is buying Noble Energy, taking advantage of oil market distress while securing strategic upstream positions in the Permian, the most prolific shale basin, among other locations.

In the background of M&A activity, overall US oil supply is ramping up through reactivation of shut-in volumes from the height of the crisis and is expected to reach 11.2 million bpd in August versus 10.7 million bpd in May.

This article does not necessarily reflect the opinion of the AJOT editorial board or Fleur de lis Publishing, Inc. and its owners.