The oil price continues to hover around a 4 month high in today’s trading session which has largely been driven by the production cuts agreed to by Opec and Non-Opec members but all the hard work to drive up the oil price may come undone by a second wave of the coronavirus which is rapidly spreading the US.
The unexpected spike of coronavirus cases across the U.S. has taken many by surprise and in states like Texas and Florida the virus spread is seemingly out of control.
The price of oil showed how sensitive it was to the first virus outbreak by tumbling below zero before recovering to today’s prices and many analysts predict that if the US can’t get the virus under control we will once again witness a sharp decline in the oil price.
“It’s really shocking for the market to see US reported infections hitting new highs by the day. News that Thursday was a day of yet another record sobered up the market today and led prices a bit lower, erasing some of the week’s earlier gains,” said Rystad Energy’s oil market analyst, Louise Dickson. “If this trend continues, oil demand in the region is at risk. It seems that only new enforced restrictions can restrict the spread of the virus currently in the US and if lockdowns are applied again nationwide the second wave will hit the country’s oil demand hard.” She added.
Some of the effects connected to the latest lockdowns should be known later in the week after the EIA release their latest report which may show a drop in demand for gasoline as people were forced to remain at home and unable to move around in their cars.
“We will get a better idea of what impact tighter restrictions in several states have had on gasoline demand with the EIA (Energy Information Administration) report this week,” said analysts from ING.