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

Oi prices are slightly up this morning – but don’t necessarily look for any piece of bullish news today.

Yesterday prices fell by big margins, shocked by seeing the official figures of the actual economic collapse in the US and France. However, after the initial tremble, traders realized that ‘ok this was mostly priced in already’ and oil prices started to recover some of the losses.

This slight recovery continues today, but still prices are below Wednesday’s levels. See today as mostly a price correction of yesterday’s panic. Prices justifiably fell, but the extent was extreme and needed to be amended.

After one the most uneventful July months of all time in terms of price action, August will for sure bring more realized volatility in prices. Traders are awaiting three important pieces of fundamental news before setting the direction for price during the beginning of August:

Today, the EIA reports the monthly official oil statistics, including oil production, for the month of May 2020 in the Petroleum Supply Monthly.

The market will be looking for clues about the extent of the production shut-ins during the height of the corona crisis, which we believe will show steeper declines than previously estimated.

However, US production is already rising as curtailed volumes are being brough back while new fracking activity remains in the doldrums still.

Second, the markets are awaiting the release of official selling prices (OSPs) from Saudi Aramco for September, which is always an important bellwether, but especially during times of imbalances in the market.

Imbalances that will likely flip during August-September as OPEC+ embarks on its scheduled production increase from tomorrow 1 August, creating a new 4-month glut.

Third, and not one to ignore, is the first evidence next week that some of the curtailed OPEC+ production is returning to production mode. How quickly that will happen and how it will affect trade flows will likely also affect prices.

It will soon start to get a lot more interesting for oil price dynamics already from next week, we believe, with a bearish sentiment being evident on trading floors at the moment. Expect some volatility, unless traders decide the summer lull can last a little while longer.

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