Oil prices are dipping as it tries to create a floor near $40.00. The market is being challenged by Germany’s industrial production data that hit 7.8% but missed expectations of 10 percent.
Concerns about record-breaking cases of the coronavirus are also weighing on market sentiment. Yet globally, oil demand remains strong even as the Atlantic Fed sees signs that the U.S. economy is leveling off or stalling is offering support. Still, U.S. China Trade War concerns are lingering. Put on the flip side, OPEC compliance to cuts is robust and reports that Saudi Arabia and Russia have persuaded Angola to comply with production cuts and compensate for past cheating fully should push agreement to the recent historic production cut to near 100%. Iran and Nigeria have also agreed to do the same. We think oil will flip later today despite the dip.
OilPrice.com reported:
"China’s crude oil imports in June hit a record high, according to a market analysis by OilX Research, in a sign that China’s thirst for crude oil is not being hampered by the coronavirus.
In June, according to data compiled by OilX, China’s crude oil imports hit a record high of 11.93 million bpd—an increase of 820,000 bpd from May levels, which were also at record levels.
This 11.93 million bpd represents 2.4 million bpd increase year over year, which is a 25.4% increase."
The increase in Chinese imports should bode well. Even though Germany’s industrial output missed its energy demand is still rising. In the U.S. though, COVID-19 fears are raising concerns that the stateside oil demand comeback could struggle.
Market Watch reports Atlanta Fed President Raphael Bostic said in an interview that the U.S. economy was leveling off.
There are a couple of things that we are seeing, and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise;. He said the regional central bank was trying to figure out “whether this leveling off is something that is a more sustained pattern, or just a pause.”
The American Petroleum Institute should report another draw in crude supply. Gulf Coast supplies are falling because of the OPEC cuts. Cushing will rise and more oil will go into the SPR. We should set the low for the week today.