Oil targets huge quarterly gain

Oil prices continued to drop as the US market opened on Tuesday, paring some of yesterday's strong gains, on concerns over the Libyan supply, which could worsens the global supply glut, but these losses are being curbed by strong Chinese data on the manufacturing and services sectors for June that showed a quick recovery from the coronavirus impact, while prices are heading toward posting a huge quarterly gain.

The US crude fell 1.8% to $38.92 a barrel, after it opened at $39.63, and hit an intraday high of $39.78, and Brent futures fell 1.1% to $41.12 a barrel, after opening at $41.58, and hit an high of $41.68.

 The US crude has gained 3.8% yesterday, and Brent July futures rose 2.4%, posting the second daily loss in 3 on hopes for the global demand recovery.

The Libyan National Oil Corporation said that progress is being made in talks with neighboring countries to lift the blockade on crude exports, after a suspension since last January due to the armed conflict between internationally recognized Al Wefaq government and Field Marshal Khalifa Haftar's forces.

If the blockade is lifted and production resumed, the Libyan crude supply will return to the global market, which can reach 1% of global supplies, but that level will not be reached unless there's political stability.

Chinese data showed today that the manufacturing sector grew by 50.9 points in June, beating forecasts of 50.4 and exceeding 50.6 in May.

The services sector also grew to 54.4 points in June, at the best pace since November, beating forecasts of 53.3, and higher than May's reading of 53.6.

The data point to a quick recovery by the world's largest oil importer and the second largest consumer from the coronavirus pandemic, which boosts the global oil demand.

The US crude has gained more than 94% and Brent rose 58% so far during the second quarter, to head for a huge quarterly gain.

This came thanks to global demand hopes after easing the coronavirus-lockdown in most countries, and the OPEC-Plus output cut agreement.

Many countries in Asia and Europe started to ease their general lockdown measures that were imposed to contain the coronavirus outbreak, which is reflected in a surge of the global oil demand.

The return to normal life after a prolonged period of lockdown, in addition to gradually restarting economic activities, will indeed improve fuel consumption levels.

The global oil demand had crashed 30 million bpd or 30% of the pre-pandemic levels, according to most international energy agencies, due to the "Great Lockdown" of the global economy.

The OPEC-Plus coalition formally agreed on June to extend the duration of the current output cut that accounts for 10% of global supply to the end of July.

This came after the coalition started implementing a global production cut by 9.7 million barrels per day in April, and was secluded to continue until June, to balance the market and support the falling prices due to the Covid-19 crisis.

During the past two months and a half, the US production fell about 2.6 million bpd, or 20% of its total, to a total of 10.5 million bpd, the lowest level since March 2018 in the week ending June 12, due to a suspension in the US production activity due to the falling prices.