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

Oil prices are declining today but it’s not much of a surprise if one thinks that Brent hit new Covid-19 highs yesterday, in the same day that API reported an unexpected massive weekly stock build. A correction was due and we can see it in today’s market.

This morning, traders are trading Brent cautiously sideways after a correction down in prices during US trading hours yesterday.

The markets may soon be interpreting Donald Trump’s coronavirus press briefing positively, as it contained perhaps the most reasonable announcements on the pandemic from the US administration in a long time.

This could be a positive for oil demand prospects. Instead of an uncontrolled, disruptive second wave of lockdowns, maybe chances have now increased that the US will eventually get the spread under control.

This could be positive for oil demand in the 6-12 month horizon and beyond, but perhaps marginally negative in the very near term if voluntary social distancing increases in the US.

Meanwhile, oil traders are shrugging off the bearish surprise from the API on US crude stock changes (7.54 million barrels build) published last night. The final verdict of last week’s US crude oil balances will be of course revealed by the DOE at 4:30 CET today, but API numbers are usually not far off.

US crude imports remains the wildcard in the noisy weekly stock report, and the market knows not to read too much into outlier figures when not considered part of a new trend.

Worth watching is the demand for safe havens such as gold and silver, with prices for both metals continuing to rise strongly, which is worth following also for the oil market.

Disagreement between the White House and the Republican congress members also shows the difficulty ahead for the economic recovery, holding market sentiment back.

So until the next fundamental news for oil supply emanates, prices will continue to be driven by sentiment factors surrounding the economy and oil demand implications.

OPEC’s tapering from August will be an experiment that could backfire still as we are nowhere near out of the woods yet for oil demand.

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