Oil prices started the week higher on Monday, boosted by positive economic data that showed signs of global economic recovery even as the number of global coronavirus cases continues to rise across the globe. Brent crude futures soared 1.12 percent as of 12:43 p.m. GMT, to $43.28 per barrel. U.S. WTI future started the session strong but retraced slightly as the day wore on. U.S. WTI futures were unchanged just after noon in London.
In addition to the economic recovery, oil prices were boosted by OPEC and its allies who agreed to reduce output for the third consecutive month in July, by cutting production by 9.7 million barrels per day. The United States, not part of OPEC or OPEC+, has also cut its production, with the number of oil and natural gas rigs falling for the ninth consecutive week last week.
U.S. WTI posted 3 percent gains week over week, last week while Brent crude gained 4 percent week over week, prompted by the strong U.S. jobs report that was released on Thursday and the decline in U.S. crude oil reserves. Still, analysts remain concerned that demand will decline if the second wave of coronavirus infections forces countries to shut down their economies again. As of now, governments remain resistant to such strict closures, and many are looking for alternate ways to stop the spread of the virus without closing businesses.
China has been importing record levels of crude oil as its economy attempts to return to normal, with May 2020 posting the country's highest-ever crude oil imports. The aggressive purchasing may be showing signs of slowing down, however, with June and July expected to see steep declines in crude imports from China.
Last Thursday, oil prices hit a four-month high, but the possibility of a second wave is keeping analysts on guard. According to one forecast by Rystad Energy, demand could decline to 86.5 million barrels per day in 2020, down 2.5 million barrels from the company's original forecast.