-ECB points fingers at US pandemic.
-Things are getting chippy in the Persian Gulf.
Crude oil prices were once again under pressure on Thursday following economic warnings from OPEC and the US Federal Reserve. Traders will be looking at the unemployment level in the United States, which is expected to show marginal improvement. Norway, a major oil producer, kept its lending rate at historic lows, though its main statistics office expressed tempered optimism about investments in the energy sector. Tensions, meanwhile, continue to orbit around the United States, with the president’s spokesperson questioning if he’d accept an election defeat. And the fallout from the Emirati pivot continues, with Iran claiming its detained members of a vessel belonging to the UAE.
The price of Brent crude oil was in retreat early in the Thursday session, falling some 1% to hit $44.89 per barrel as of 8 a.m. ET. The global benchmark for the price of oil has been lulling the market to sleep, wavering around the $45 mark for much of the month. Much of the action, meanwhile, remains in the front-month contract, particularly for West Texas Intermediate.
The joint committee monitoring compliance among the handful of producers joining OPEC in voluntary curtailments noted there were signs of gradual improvement in the global economy. Data from the United States, seen as a bellwether of sorts for general conditions, show crude oil inventories on the decline, suggesting improvements in demand. But retail fuel levels, another sign of appetite, moved lower during the week ending Aug. 14. Minutes from the OPEC session noted that “the pace of recovery appeared to be slower than anticipated with growing risks of a prolonged wave of COVID-19.”
Minutes from the July meeting of the US Federal Reserve, meanwhile, showed there were modest signs of growth, but not enough to offset the sharp contractions from early this year. Economists revised their estimate of second-quarter GDP higher relative to the June meeting, though the fall is still historic.
“The projected rate of recovery in real GDP, and the pace of declines in the unemployment rate, over the second half of this year were expected to be somewhat less robust than in the previous forecast,” the meetings continued.
US cases of coronavirus topped 5 million early this month as the politicized response to the pandemic inhibits recovery. The number of positive cases in the United States is about the same as the entire population of Norway, which in early August re-imposed lockdowns as the number of positive cases ticked toward 10,000. Norway’s central bank on Thursday announced it would keep its interest rates at historic lows given stubbornly high levels of unemployment and an overheated housing market.
“The committee’s assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead,” bank Governor Øystein Olsen said in a statement.
Norway is not a party to OPEC, but is doing its part to help keep the market in balance. According to estimates from the Bloomberg news agency, Norway will trim about a quarter million barrels per day from loadings in September. The country’s main statistics office, meanwhile, noted that total investments in oil and gas activity is expected to be about 1.6% above the levels from last year.
“All investment categories have been revised upwards, but it is particularly exploration and fields on stream that contribute to the overall upward adjustment,” the statement from Statistics Norway read.
In the European economy, the bloc’s central bank found that economic indicators remained low, any recovery was nascent and the outlook was uncertain. On broader conditions, the European Central Bank noted that optimism had “gone hand in hand with surging coronavirus (COVID-19) cases in the United States and many emerging market economies, raising fears of a broader relapse in containing the spread of the virus.”
The toxification of the United States continues. US President Donald Trump on Wednesday seemingly embraced an online conspiracy movement, QAnon, which claims the president is a bastion against a Satanic cult of pedophiles connected to his rivals in the Democratic Party. His press secretary said the president would “make a determination in the aftermath” of the election should he lose, demeaning a central foundation of US democracy. His foreign policy decisions, meanwhile, continue to make waves. The UAE embrace of Israel built up an anti-Iranian block in the Middle East, and the deal sweetener may be US stealth jet fighters to the UAE that Trump said would make a “great advance in peace in the Middle East.” But rather than acquiesce to the pressure, Iran has only become emboldened. This week, Iran seized an Emirati vessel that allegedly strayed into Iranian waters. The UAE, meanwhile, fired on Iranian fishing boats, leaving two people dead. Tensions like these in and around the Persian Gulf last year spiked the price of oil and, with crude oil prices stuck in something of a tunnel, a geopolitical risk premium cannot be ruled out.