The oil price got a midweek boost this week as US inventories fell unexpectedly, sending Brent crude to its highest since March, above US$46 a barrel.
It was a mixed picture as the dollar weakened, the oil price strengthened, and US and European industry figures looked more optimistic.
In Friday trading, Brent crude was down below US$45 and WTI was holding above US$41 a barrel.
Despite some signs of reassuring news on the economic front, rising numbers of coronavirus cases continued to derail any progress and keep the markets nervous.
The US Labour Department issued a statement that 1.8 million jobs were added to the market in June and the unemployment rate has dropped to 10.2%.
It estimated that the US lost more than 22 million jobs in the pandemic fallout. The president of Prestige Economics, Jason Schenker said the recovery will take time reminding us that peak jobless claims after the great recession in 2009 was around 6.6 million a week.
Currently the US numbers are above 16 million claims. He said: "..the U.S. job market is weaker than today's jobs report headline numbers imply,” adding that "the labour market will take a while to recover, even if some recent weekly data have improved".
Oil stockpiles were down 7.4 million barrels last week, according to the Energy Information Administration.
The market had expected draw of around 3 million barrels. There are glimmers of economic activity returning and the US government is also working on a coronavirus relief package that could help consumers.
IHS Markit also reported stronger European figures in the Composite Purchasing Managers index.
Oil imports to China
Oil imports to China fell this week and the US continued its anti-Chinese sentiment with President Donald Trump talking tough against Chinese tech giants.
He signed executive orders prohibiting Americans from using popular Chinese origin applications like TikTok and WeChat, increasing wider trade tensions for both countries. The stock market responded negatively, and analysts see any further deterioration in relations between the two countries as negative for global growth.
While OPEC+ eased production cuts this month, Iraq promised to step up its commitments having failed to deliver on previous cuts, removing just 11,000 barrels a day last month according to Bloomberg.
After talks this week with Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, the newly appointed Iraqi oil minister Ihsan Abdul Jabber said his country will cut output for August and September by an additional 400,000 barrels a day.
Prince Abdulaziz is chairman of the OPEC’s Joint Ministerial Monitoring Committee and he has been calling for stricter compliance all year and pressuring the countries who have resisted.
Iraq is OPEC’s second biggest producer and this adjustment should put their new target at 3.4 million barrels a day for a couple of months. OPEC’s next JMMC meeting will be later this month.
American oil production is currently above 10 million barrels a day, down from the glory days of 13 million barrels a day pre-Covid 19.
Poor results from oilers
Oil companies have delivered a set of expected poor results for the second quarter with many of the international oil companies re-assessing assets and reserves.
The CEO of Parsley Energy, Matt Gallagher, speaking on CNBC said he does not see an increase in US production in the near future.
He said it’s been a great ten years for the US oil industry but said it’s now time for US shale “to deliver on financial results and not just growth for the industry sake”.
He said the industry does not need extra barrels on the market and said he would keep production flat for the rest of the year with oil prices expected to stay stable in low forties.
Oil producers will carefully monitor supply side as they prepare for the OPEC ministerial monitoring meeting later this month.
With global demand still struggling, maintaining prices even at the current levels will be essential rather than face even lower prices.