The Monday trading session saw a mixed movement with the Brent crude oil edging higher on tighter supplies and positive economic data.
After a long span of downfall, the Brent crude is finally on a rebound. It rebounded close to a 20-week high at almost $43 per barrel. For the last two months, oil prices have been moving in a close range as OPEC+ output cuts achieved its desired goal of stabilizing a market that was threatened by volatility.
Earlier on Friday, both U.S. and U.K. crude futures’ prices nosedived after gaining over 2 percent a day earlier. This was followed by the release of U.S. non-farm payroll data that recorded a surge of 4.8 million jobs last month alongside a fall in U.S. crude oil inventories.
However, the faltering of the crude price on Friday can be assigned to a weekend sell-off resulting from the growing uncertainties over a spike in pandemic cases in the United States. A steeper supply cut from OPEC+ alongside signs of a broad-based recovery in the global economy had resulted in the earlier spike.
What to expect in the 2nd half of the year?
Amid the rising cases if pandemic, according to EIA (Environmental Impact Assessment) relatively low demand in natural gas will keep spot prices lower than $2/MMBtu through August. However, according to EIA, the prices will eventually rise through the end of 2021.
Natural gas price is expected to increase the sharpest this fall and winter when it has the potential to rise from an average of $2.06/MMBtu in September to $3.08/MMBtu in the month of January.
Despite the forecast of record end of October storage levels, EIA expects that rising demand heading into the end of the year, combined with wilful decreased production, will cause a surge in prices. EIA forecasts that Henry Hub natural gas spot prices will average $2.04/MMBtu in 2020 and $3.08/MMBtu in 2021.
The COVID factor
What looks like one of the worst nightmares of the 21st century, the coronavirus or COVID-19 brought the entire world to its knees. The energy companies are already resetting their goals to suit the current situation. For instance, for the first time since WWII, Shell cut its dividends while BP said it would review projects against price forecasts that are 20 to 30 percent lower.
Most of the countries, like Nigeria and Venezuela that are dependent on oil production for government revenue, are already suffering for a while now that the demand is at a record low. OPEC’s oil production for the month of June was at the lowest since May 1991 during the Gulf War, which has collectively met its planned production cut.
Setting the Trend
As the world is looking at the pharma sector with the biggest expectations for a vaccine, the destiny of the energy industry remains uncertain unless any further development. While some analysts believe that the supply and demand will be back to normal in a couple of years, others think that the energy industry might not bounce back so easily as the world is getting accustomed to the new normal of social distancing and staying indoors.
Therefore, let us wait a little while and find out for sure what awaits the energy sector.
This Article is contributed by WorldStocks team.
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