OIL FUTURES: Crude rises as economic optimism trumps US concerns

New York — 1059 GMT: Crude oil prices made ground during the European morning trading session on July 6, taking their cue from rising Asian indexes rather than from bad news about coronavirus in the US.

As of 1059 GMT, ICE September Brent crude futures were up 50 cents from the close on July 3 at $43.30/b, while the NYMEX August light sweet crude contract was up 40 cents at $40.64/b.

"Asian indices opened on a four-month high today, kicking off the week in...positive expectations over the hopes of the Chinese economic engine sustaining global growth, despite rising [coronavirus] cases in the US," Mihir Kapadia, CEO of investment management firm Sun Global Investments, said in a note July 6.

In the US, deaths from COVID-19 reached 129,576 on July 5, and the total number of infections reached 2,841,906, according to the US Centers for Disease Control and Prevention. Texas reported 3,449 cases on July 5, California reported 5,410 cases, and Arizona reported 3,536 cases. This represented a continued rise, analysts said.

There is concern that the rise of COVID-19 related deaths in the US will choke demand and economic growth, analysts said. However, the bulls may interpret this in a positive light.

"I don't think a lot of people will be surprised when we see Q2 2020 earnings, they will see they are bad but not as bad we expected," according to Michael Poulsen, senior oil risk manager at hedging company Global Risk Management.

"I think the market is running a little ahead of itself in its optimism," he said.

Any bad news encourages expectations that central banks will pump more money into various asset classes, he added.

In Europe, the medium-to-short term outlook presents some bearish prospects. European Central Bank President Christine Lagarde said recently that the eurozone faces about two years of downward pressure, before the economy transforms in reaction to coronavirus and recovers.

The pandemic will expedite the pre-existing shift towards digitization and automation, shorter supply chains and greener industries, she said.

This points to more people working from home, which is bearish for oil demand, analysts at investment bank Commerzbank said in a note.

One signpost market players are looking out for is the current OPEC+ deal, which expires at the end of July. Investors are watching for any possible extension at the upcoming July 15 meeting of the OPEC+ Joint Ministerial Monitoring Committee.