OIL back in black on lower taxes

Daniel Fowler
June 28, 2020

A record crude supply cut by the Organization of the Petroleum Exporting Countries and allies has kept the oil market much stronger than in April, when Brent hit a 21-year low below $16 a barrel and US crude turned negative.

"The conditions this year are ideal this year for India to bring its oil import bill close to the halfway mark of FY20 levels. Traffic in London and NY rose steadily in recent weeks although it remained well below pre-Covid-19 levels, TomTom data showed, while in Moscow it was back at last year's levels".

Earlier gains, supported by optimism over rising road traffic boosting fuel demand, were erased in early USA trading on fears that spiking COVID-19 infections in large gasoline-consuming US states could stall the demand recovery. In distillate fuels, where demand has been slower to recover than in gasoline, the EIA reported an inventory rise of 249,000 barrels for the week to June 19, up from a 1.4-million-barrel draw reported for the previous week.

Brent crude futures were 13 cents lower at US$40.92 at 1342 GMT. "Currently, those barrels are underpinned by the USA benchmark WTI, reflecting crude delivered at Cushing, Oklahoma, some 500 miles (800 km) away".

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A survey of executives in the top US oil and gas producing region by the Dallas Federal Reserve Bank found more than half of executives who cut production expect to resume some output by the end of July.

BP wrote off $18 billion worth of assets this week, as oil prices are set to trade lower as investors fears of a second wave of coronavirus cases mounts. Well, the natural gas market can do it to you!

Signs of weakening demand from the world's largest oil consumer are now starting to weigh on export prices for American crude, according to industry participants. In early trading, the NYMEX contract dipped 11.5 cents to around $1.48 per one million British thermal units (MMBtu) after the EIA reported a massive 120 billion cubic feet injection to gas storage - the largest one-week addition to stocks in almost 14 months, EIA data shows. I still think oil is on track for $50 a barrel later this year.

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