Market Close: July 16 Down
Jul 16th, 2020 by loren
Oil futures ended lower Thursday, taking a cue from a decline in global equities, after holding their own a day earlier following a decision by the Organization of the Petroleum Exporting Countries and its allies to begin trimming production cuts next month. “With the OPEC+ decision behind us, oil futures are continuing to trade with a high degree of correlation to the equity markets as the biggest threat to risk assets here, including oil, is another wave of economic shutdowns due to the latest resurgence in the COVID-19 outbreak,” said Tyler Richey, co-editor at Sevens Report Research. “Case in point, oil rallied on the positive vaccine headlines earlier this week but pulled back with global stocks after disappointing retail sales data from China overnight.”
China’s retail sales fell 1.8% year-over-year in June, though its economy grew 3.2%in the second quarter from a year earlier. The supply dynamics of the oil market are “pretty stable right now,” Richey told MarketWatch. “However the demand input to the oil economics equation is where the unknowns lie.” ”If the spike in COVID-19 cases threatens the global economic reopening/normalization process, then we expect a pullback in oil,” he said. “Conversely, if everything remains on track and growth continues to rebound relatively swiftly as we have seen in recent months, then a demand-driven rally in WTI” back towards the $50 a]barrel level will become increasingly likely.
West Texas Intermediate crude for August delivery on the New York Mercantile Exchange fell 45 cents, or 1.1%, to settle at $40.75 a barrel, while September Brent crude the global benchmark, lost 42 cents, or 1%, at $43.37 a barrel on ICE Futures Europe. The price decline for both benchmarks followed two straight sessions of gains.
Oil ended at a more than four-month high Wednesday after the OPEC+ alliance agreed to allow record production cuts of 9.7 million barrels per day to decrease to 7.7 million barrels per day starting August, in line with a previous OPEC+ agreement to gradually taper the reductions. However, at the same time, countries that failed to abide by their quota limits since the latest pact began in May are required to cut output even more in August to compensate for their overproduction.
Have a Great Day,