Oil prices are creeping back up as hopes for a relief package, and heavy traffic and industrial data out of China, are raising demand hopes.
With the tightening U.S. oil supply, it is clear that the OPEC plus cuts have been significant yet concerns of how to deal with the return of Libyan oil on the market are weighing. Coronavirus vaccine’s hopes are again rising, offsetting somewhat a surge of new coronavirus infection concerns.
The mood of the market is rising as House Speaker Nancy Pelosi said another coronavirus stimulus plan is possible. The democrats have cut their demands by about 1 trillion, but above what the Republicans want to spend. Still, with polls showing that voters are upset about the lack of a relief bill, the odds increase that they might get something done.
Reports show that Chinese road traffic has exceeded 2019 levels making China the global driver for oil demand growth. Reuters reported that China’s industrial output accelerated the most in eight months in August, while retail sales grew for the first time this year, suggesting the economic recovery is gathering pace as demand starts to improve more broadly from the coronavirus crisis.
Reuters reported industrial output growth quickened to 5.6% in August from a year earlier, the fastest in eight months, data from the National Statistics Bureau showed on Tuesday. Analysts polled by Reuters had expected a 5.1% rise from 4.8% in July. China retail sales also beat analysts’ forecast with a 0.5% rise, snapping a seven-month downturn and bettering expectations for zero growth. In July, sales dropped 1.1%, but consumer confidence has been picking up lately, from spending on automobiles and duty-free shopping. Auto sales rose 11.8% in August year-on-year while sales of telecoms products jumped 25.1%, the data showed.
France’s Finance Minister also has said that France has no plans for a general coronavirus lockdown. That is also a positive as last week had the UK coronavirus pullback.
Natural gas rocked back as storms and weather caused exciting scenarios. Andrew Weissman of EBW Analytics writes:
“October and November contracts were crushed early last week, due to disruption in LNG cargo loading caused by TS Beta which forced steep reductions in feedgas flows at Sabine Pass and Freeport, and very mild weather—pushing prices at Henry Hub to just $1.335. The October contract then rebounded sharply after feedgas flows started to recover, and posted further gains after EIA reported a much smaller-than-expected 66 Bcf injection and cash prices rebounded to $1.935—only to crash Friday again when October options expired."
Price action on Monday, when October expires, is uncertain. While cash prices in October are likely to average at least 50 cents above Friday’s close, downward pressure is still likely.
With demand even near seasonal lows, weighing on cash prices, the November contract could remain under pressure early this week. As the week progresses, though, demand is likely to increase. With cold weather expected a week from now, November could rebound sharply.