Month in brief

• DOI: http://doi.org/10.1111/oet.12809
• Published date: 01 August 2020
• Date: 01 August 2020

THE MONTH IN BRIEF

Month in brief

Stability returned to the oil markets in July, with front-

month September Brent crude trading in a narrow range

of between $42/bbl and $44.50/bbl all month—in sharp

contrast to the extreme volatility seen in the spring

months this year as the Covid-19 pandemic took hold.

July began with prices strengthening, on improving

demand outlooks, which were boosted in the United

States by a bigger-than-expected rise in US employment,

after earlier sharp falls. July 2nd, Brent had reached a

4-month high of Just over $43/bbl. But from the begin-

ning of the first full week of the month, growing concern

over a continued rise in Covid-19 infection rates, espe-

cially in the United States, began to balance out the

improved demand outlooks—which resulted in

rangebound prices for the rest of the month.

Other support early in the month came from Saudi

Aramco's decision to increase its official selling price dif-

ferentials for August crude oil exports to Asia by just $1/

bbl, after big rises in previous months, which was consid-

ered bullish for Asian refinery demand.

Sentiment weakened slightly in the middle of the

second week as US crude stock numbers rose, and

exports fell, while concern over rising coronavirus

cases continued to fester—leading to falls in US equity

markets. On July 9th, front-month NYMEX WTI

fell back below $40/bbl for the first time in a week,

and Brent also fell slightly, before bouncing back

on the Friday due to rising demand forecasts and

growing evidence of tight compliance by OPEC-plus

countries to output quotas agreed in April (see

Looking Ahead).

There was little movement for the first 2 days of the

week of July 13th, before a sharp fall in US stocks pro-

vided support mid-week, pushing up prices a little.

Strong US product demand growth, especially for

diesel, also helped offset any disappointment in the

market from OPEC-plus decision not to roll over July's

9.7 mn bpd production cuts into August, but to ease

them to 7.7 mn bpd as planned. On Wednesday 15th

July, NYMEX August WTI settled up at $41.20/bbl,

while ICE September Brent reached $43.79/bbl. Levels

then eased back slightly at the end of the week as fears

over rising Covid-19 cases, and the impact that might

have on oil demand, rose to the fore again.

The following week, sentiment picked up on the back

of promising news of progress on a potential coronavirus

vaccine from AstraZeneca and Oxford University, which

increased confidence that at least one vaccine would be

commercially ready by 2021. However, the impact on

prices was capped by an acceleration in the rise in Covid-

19 cases, especially in the United States. Agreement on a

major EU stimulus package was supportive mid-week, but

then, on 23rd July, US unemployment rose again unex-

pectedly, casting doubt over the post-pandemic economic

recovery and sending crude prices back down slightly.

The following days saw little movement, with tighter

supply and improving short-term demand offset by grow-

ing concerns that medium term demand was unlikely to

fully rebound as expected. There was some upward pres-

sure on 29th July, due to a weaker dollar and another rise

in US inventories, but at the end of the month the grow-

ing pandemic worries saw prices wobble again, although

Brent held on above $43/bbl.

How to cite this article: Month in brief. Oil and

Energy Trends. 2020;45:6. https://doi.org/10.1111/

oet.12809

DOI: 10.1111/oet.12809

6© 2020 John Wiley & Sons Ltd Oil and Energy Trends. 2020;45:6.wileyonlinelibrary.com/journal/oet