Oil prices skyrocketed for a week, apparently this is the trigger

Jakarta, CNBC Indonesia – World oil prices this week (week on week/ WoW) was observed to strengthen slightly driven by stronger economic data. However, the increase was limited due to concerns about escalating tensions between the United States and China to dampen demand.

The price of Brent oil which is a global benchmark rose US $ 0.2 or 0.46% to US $ 43.34 / barrel at the close of Friday (24/7/2020) local time, from US $ 43.14.30 / barrel last Friday (7/17/2020).

While for the type of light sweet that became the reference oil of the United States (US) namely West Texas Intermediate (WTI) strengthened US $ 0.7 or 1.72% to US $ 41.29 barrels at the close last Friday (24/7/2020) from US $ 40.59 / barrel last Friday (7/17/2020).

The rise in black gold prices was driven by US business activity data for July which rose to a six-month high, ending a five-month contraction in a row. The Markit HIS Debut report revealed that the US composite PMI production index, which tracks the manufacturing and service sectors was at 50 from 47.9 in June.

While the weakening of the US dollar helped support the demand for WTI oil, because it is greenback the weakness makes US dollar-denominated oil more affordable or cheaper for foreign buyers.

In addition, positive sentiment for the price of black gold also came from news related to the clinical trial results of vaccine candidates owned by the British-based pharmaceutical company AstraZeneca.

In the first phase of a trial of 1,000 patients, a dose of the vaccine called ChAdOx1 nCov-19 succeeded in increasing the patient’s immune response, strengthening their antibodies and white blood cells in fighting the virus.

“The immune response that arises after vaccination is in line with our expectations that this immune system can provide protection against the SARS-CoV-2 virus, although we then have to conduct clinical trials to confirm this,” said Andrew Pollard, an Oxford Vaccine Trial Investigator.

“The strongest immune response shown by patients who received 2 doses of the vaccine indicates that this might be a good strategy for vaccination,” he concluded.

“With the opening of the economy in most countries in the world … oil demand should rise, especially if the vaccine is immediately available,” said Fawad Razaqzada, market analyst at ThinkMarkets.

The oil market largely ignored rising tensions between the US and China after Beijing retaliated on Friday and ordered the closure of the US consulate in Chengdu. Earlier the US ordered China to close its diplomatic consulate in Houston on Tuesday for theft of Intellectual Property.

However, what concerns market participants and investors is whether the black gold can extend its recovery momentum, due to an unexpected increase in US crude oil inventories and locking up (lockdown) only in a few US states.

Energy Information Administration (EIA) data showed on Wednesday that US crude oil inventories rose 4.9 million barrels in the week to July 17 to 536.6 million barrels compared to expectations for a decline of 2.1 million barrels.

The increase in stock is inversely proportional to market expectations which forecast a decline of 2.1 million barrels. At the same time production also increased to 11.1 million barrels per day (bpd) or increased by 100,000 bpd.

“Overall, this will show that the recovery in demand that we are seeing from below seems to be choked up,” Phil Flynn, a senior analyst at Chicago-based Price Futures Group, told Reuters.


[Gambas:Video CNBC]

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