The US Food and Drug Administration has given Pfizer/BioNTech full approval for their vaccine. This could disperse the reluctance to take vaccine in the United States. Due to slowing demand, oil has been under pressure as China and the US had to impose movement restrictions. This is in response to the sudden surge in Covid-19 cases.
The pessimistic sentiment around the oil demand has been reversed, with oil prices gaining this week.
Furthermore, China has been experiencing a decline, with zero new Covid-19 cases reported this week. China imposed lockdowns again after it suffered outbreaks in multiple provinces.
The largest oil importer is a key driver of oil prices. With the declining infections, oil demand could recover.
In India, refinery yields increased in July by 10% versus last year, and the country’s fuel demand increased in April.
Hedge funds are selling off oil.
Hedge funds that trade oil on a large scale have been selling off oil futures for the last seven weeks, and this change could mean they will change their sentiment.
They sold the equivalent of around 25 million barrels of Brent crude and 9 million barrels of West Texas Intermediate oil.
According to Reuters market analyst, the sales were for profit-taking mostly; however, 12 million barrels were shorting to prepare for weak oil fundamentals in quarter two. Traders have sold 253 million barrels since June.
Analysts feel that even though restrictions might be easing and vaccination rollouts increased, the government might still guard against international travel. The outlook for oil demand is still a bit sceptical.
In the US, companies are starting to demand workers to take vaccines. And analysts foresee an increase in business travel.
According to Fed officials, the Fed’s tapering plans will have to start sooner because the growing economy has also resulted in oil’s decline. If tapering happens later, it will mean bullish for oil. The short-term outlook of the virus is still threatening; the recent infections rate could increase the chances of this occurring.