U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Monday, but posting a second-consecutive rangebound day as prices remain inside last Thursday’s unusually wide trading range. The price action suggests a couple of things, investor indecision or the transitioning from bullish to bearish as the market adjusts to COVID-19 related demand shifts that are likely to lead to a rise in global supply.
Other analysts agree that prices are being pressured by rising coronavirus cases around the globe and by oversupply worries as OPEC and its allies are set to wind back up output cuts in August, but supported by positive industry data in Europe and Asia.
Stronger PMI Data Out of China, Euro Zone
A private survey released Monday showed China’s manufacturing activity expanded in July. The Caixin/Markit manufacturing Purchasing Manger’s Index came in at 52.8 for July, above expectations for a reading of 51.3 by economists in a Reuters poll.
In the Euro Zone, manufacturing activity across the region expanded for the first time since early 2019 last month as demand rebounded after more easing of the restrictions imposed to quell the spread of the new coronavirus, a survey showed on Monday.
IHS Markit’s final Manufacturing Purchasing Managers’ Index bounced to 51.8 in July from June’s 47.4 – its first time above the 50 mark that separates growth from contraction since January 2019.
Russia is Raising Oil Output as OPEC+ Cuts Ease: Reuters Source
Russian oil and gas condensate output increased to 9.8 million barrels per day (bpd) on August 1-2 from 9.37 million bpd in July as the country eases production curbs under an OPEC+ deal, a source familiar with data said on Monday. The Energy Ministry declined to comment on the data.
Russia has said it will increase its crude oil production by 400,000 bpd as part of that deal, which does not include output of gas condensate, a light oil.
WTI and Brent crude oil could remain rangebound until traders get more clarity about how the new surge in COVID-19 cases will affect demand. Traders are also likely to try to hold prices in a range until they see how the OPEC+ output cut tapering changes the supply dynamic.
With most money managers on the sidelines or investing in other momentum driven markets like the metals, crude oil speculators are getting a little nervous about attacking the long side of the market because of worries over the strength of the demand recovery. Bullish speculators are concerned that the surge in coronavirus cases in the U.S. and around the world could slow the recovery if more restrictions are put into place.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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