Early today, oil prices stopped falling and started gaining in value. The rise was caused by investors' expectations of a more rapid recovery of oil demand. However, the increase was capped by a reimposing of quarantine measures on the territory of some countries. The total number of coronavirus infections in the world continues to grow steadily every day. This causes fears among market participants and acts as a limiting factor for a further rise in oil prices.
This morning, the price of futures contracts for Brent crude oil for delivery in September advanced by 0.42% to trade at 43.46 dollars per barrel.
The price of futures contracts for WTI crude oil for delivery in August also went up today by 0.27%. It is still trading in the range of 40.92 dollars per barrel.
Thus, both benchmarks consolidated above the strategically important level of $40 per barrel to start a rally to the next support level.
Commodities are mainly boosted by the news about positive tests of the future vaccine against the coronavirus infection. Everybody hopes that this autumn, the vaccine will be ready for mass production and use.
The gradual lifting of the lockdown measures and opening of the economies of the largest countries were the impetus for improving in the oil demand. And if the drug against COVID-19 is released, the demand will receive even greater incentive and support.
However, the pandemic continues to cause a lot of problems in some countries of the world. For example, in the United States and India, the daily increase in the number of infected people is at an extremely high level and beats all previous records. At the same time, in Spain and Australia, the authorities are making every effort to cope with new outbreaks of the disease and prevent the second wave.
Today, the number of patients with the coronavirus in the world has exceeded 14.6 million people, with a total of 606,979 deaths.
However, despite the deteriorating epidemiological situation in the world, commodities found support and moved up. Oil prices advanced amid unexpected measures taken to stimulate economies of the EU and the United States.
The EU leaders have finally reached a deal on a huge post-coronavirus recovery package. It involves 750 billion euros in grants and loans.
The US authorities have also come to a conclusion that there is a need for a new aid packaged that can support the country's economy in the alarming situation. By the end of this month, approximately 25 million American residents will not be able to receive support from the state in the amount of $600 in unemployment benefits. This, of course, will immediately affect consumer spending. It is expected to decline. In order to avoid such a situation, the US government will meet to decide on new support measures.
At the same time, it is worth noting that oil prices almost ceased to experience pressure from OPEC. Last week, during the meeting, it was decided to ease the oil production cuts in accordance with the agreement signed in April this year. Most analysts agree that this fact will not put significant pressure on demand, since the market has recently begun to experience a slight supply deficit. However, if oil reserves in the United States increase again, the cost of the Brent crude may be under pressure. However, it will be a short-lived phenomenon.