Crude oil is pushing off of earlier lows on Tuesday, helping to propel the energy, material, and industrial sectors and ETFs higher.
Crude has been trading in a narrow range over the past month or so, following a dramatic move higher off of the April historic lows, which reached the negative territory. West Texas Intermediate crude oil is trading 0.6% higher, a little below the $40.57 daily high, as traders and investors await the inventory report.
The United States Oil Fund LP (USO) gained 1.67% while the Energy Select Sector SPDR ETF (XLE) is up 2.66%, boosted by Chevron and Exxon shares, which are gaining amid a mixed stock market.
After a solid run higher in the first half of Monday trading, stocks staged a dramatic turnaround, giving back all gains and closing lower on the day amid fresh concerns that the coronavirus resurgence will ravage the economy once again. On Tuesday equities are vacillating, weighing bank earnings, and continued virus concerns.
“We may see this earnings season as one where companies speak honestly and send a slightly different message than, we’re never going to look back from the bottom,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. “I think it’s appropriate that companies are honest even if it’s deemed as throwing cold water on the v-shaped narrative.”
Oil markets could be affected once again if demand continues to decline, as fresh outbreaks are appearing around the world, and officials are initiating more rigid in an effort to control the spread. Japan noted that a new state of emergency is possible and Hong Kong initiated its most stringent social distancing measures to date. California has also prohibited consumers from using indoor dining and bars, and face coverings will soon be required in all stores in England.
“Should lockdowns have to be further extended in the U.S., this bad news might be also good news for the markets in respect to the Fed and Washington even extending their supporting measures for the economy,” said Robert Greil, chief strategist at Merck Finck.
Despite the devastating coronavirus pandemic that locked down China for weeks, however, the country’s overall crude oil imports during the first half of the year climbed almost 10% from the first half of 2019, customs data cited by Reuters has revealed.
China had started to stockpile cheap oil immediately after the benchmarks crashed following the commencement of Saudi Arabia’s price war with Russia that coincided with the start of the spread of the coronavirus.
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