Oil prices jump over positive China data, higher demand; Bonny Light loses $0.93

Amin Masser, Saudi Aramco’s Chief Executive Officer Sunday said he expected oil demand to rebound in Asia in light of the gradual restart of economies.

China’s factory deflation fell last month, supported by global oil prices spike and as industrial operations rallied towards pre-pandemic levels, boosting possibilities of recovery in the world’s second-biggest economy.

Giovanni Staunovo, analyst at UBS, said ‘with oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivize strong production growth in the United States, the oil market remains undersupplied.’

Read also: Oil prices rise after plunge in U.S. crude inventories

Iraq stated on Friday it would scale back oil production by additional 400,000 barrels per day in August and September to make up for its overproduction in the last three months. The plan will help it comply with its own share of cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and allies known as OPEC+.

‘This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts,’ said Commerzbank analyst, Eugen Weinberg.

Yet, uncertainty around United States fiscal stimulus strained prices. President Donald Trump signed a number of presidential directives to extend unemployment benefits after negotiation with Congress collapsed.

Nancy Pelosi, U.S. House Speaker, and Steven Mnuchin, Treasury Secretary said on Sunday they were open to restarting talks.

“The longer this drags on the worse it is for the demand scenario,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.

Also stoking the uncertainty were current tensions between Washington and Beijing. Trump endorsed two executive orders forbidding WeChat and TikTok in 45 days’ time while declaring penalties on 11 Chinese and Hong Kong officials.

Markets will now be on the lookout for a China-U.S. meeting on trade talks timed to hold this weekend.