Futures Movers: Oil prices retreat, poised for hefty year-to-date losses as coronavirus cases, oversupply worries haunt industry

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Oil futures traded lower on Tuesday as persistent concerns about the rising number of cases of COVID-19 and the threat of more oil flowing out of the Middle East more than offset upbeat data suggesting both China’s manufacturing and service sectors are recovering.

Despite a significant rebound for oil prices in the second quarter, oil prices were still on track to end the first half of the year with losses of close to 40%.

The global tally for confirmed cases of the coronavirus that causes COVID-19 rose to 10.3 million on Tuesday, according to data aggregated by Johns Hopkins University. The number of deaths climbed to 505,518, while the number of people who have recovered reached 5.2 million.

A steady climb in the number of infections has raised the threat of delaying or reversing efforts to reopen economies that have been facing lockdowns to curb the coronavirus pandemic.

On top of that, investors were monitoring Libya to see if the oil exporter would resume oil production which has been almost entirely blockaded since January amid the country’s civil war, Reuters reported.

Meanwhile, China’s official manufacturing purchasing managers for June rose to 50.9 from 50.6 in May, while the services PMI rose to 54.4 from 53.6, suggesting the second-largest economy and biggest importer of oil is continuing to show signs of recovery from the virus that was first identified in Wuhan.

Optimism around those results hasn’t, however, taken focus away from the resurgence of the epidemic in parts of the U.S., commodity investors say.

“The relatively promising economic data cannot shake off the fear of a second wave of the Covid-19, especially in the US, which is again imposing social distancing restrictions in big economic states like California, Texas, and Florida,” wrote Louise Dickson, oil markets analyst at Rystad Energy, in a Tuesday research report.

On Tuesday, West Texas Intermediate crude for August CLQ20, -0.57% fell 59 cents, or 1.5%, at $39.10 a barrel on the New York Mercantile Exchange, after a 3.1% gain Monday.

So far this year, prices based on the front-month contracts, were around 36% lower. For the quarter, however, prices were up around 91%.

Global benchmark Brent oil for August delivery BRNQ20, -1.48% shed 62 cents, or 1.5%, to trade at $41.09 a barrel on ICE Futures Europe. Front-month contract prices were down by around 38% year to date, but up nearly 57% for the quarter.

The August contract expires at the end of the session. The soon-to-be front month September BRNU20, -0.86% fell 55 cents, or 1.3%, to $41.30.

“The second quarter will not soon be forgotten by energy traders given that WTI crude oil futures plunged into negative territory for the first time in history, and decidedly so, in the month of April,” said Tyler Richey, co-editor at Sevens Report Research. That was “due to logistics issues in the physical supply chain, most notably a critical lack of available storage for freshly lifted crude barrels in the U.S.” On April 20, WTI oil futures fell 306% to settle at negative $37.63.

“Since then, oil and refined product markets have staged an equally historic rebound with prices poised to end the second quarter nearly 100% higher than where they ended Q1 due to a swift recovery in consumer demand as well as sharp output cuts by global oil producers,” Richey told MarketWatch.

“As we move into the second half of the year, the energy rebound is showing signs of stalling, however, as traders assess the threat of the recent resurgence in COVID-19 cases and the looming possibility of more economic shutdowns in the back half of the year,” he said.

“If this most recent wave of the outbreak peaks in the coming days or weeks, and the process of economic reopenings resumes, then normalizing market conditions should see WTI crude oil prices continue to grind back towards the pre-pandemic price range between $50 and $60 a barrel as the market becomes more balanced,” he added.

Oil products traded on Nymex moved higher in Tuesday dealings, ahead of the expiration of the July contracts at the end of the session.

July gasoline RBN20, +1.21% rose 1% to $1.1963 a gallon, with prices based on the front-month contract poised to more than double for the quarter. Still, they were down nearly 30% year to date.

July heating oil HON20, +1.23% added 0.4% to $1.1704 a gallon, with prices up over 17% for the quarter, but down around 42% so far this year.

August natural gas NGQ20, +1.63% traded at $1.755 per million British thermal units, up 2.7% in Tuesday’s session. Prices were looking at a quarterly rise of nearly 7% and a loss of over 20% for the year to date.

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