Oil prices largely stable as declining gasoline stocks balance Covid-19 negativity

"Given the volatility that still remains in the oil market it is curious that the oil price itself is so steadfast and tied down to about US$40/bbl.

Meanwhile, Libyan crude production is an unsure card and the oil demand recovery continues to be threatened from a second Covid-19 wave.

Even after US inventories built by 5.7 million bbl (bringing stockpiles to yet another record high), traders barely flinched.

Gasoline stocks have lots to do with sheltering the oil price as they declined by amounts that were not expected and showed that road fuel demand is becoming robust again. Such news would normally lift the market, but under the current conditions they just help oil prices largely maintain their levels, instead of falling much by Covid-19-related negativity.

Covid-19 cases continue to increase in the US and traders wonder when they will see an end of this, when the trend will change. But as the US, Brazil and other countries continue to get hammered by Covid-19, demand is at stake.

In terms of supply, we still see continued compliance from OPEC+ signatories, who likely fulfilled production cut quotas by nearly 100% in June. We await the next JMMC meeting on July 15 for further clues on oil market management strategy. If it becomes more evident a second wave of Covid-19 will have a negative impact on oil demand, OPEC may step in to decide to keep deeper cuts into August, instead of increasing the group's production by a planned 2 million bpd.

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