WTI has opened up higher following the general risk mood after the US Food and Drug Administration (FDA) authorised the use of blood plasma from COVID-19 survivors to treat sick patients. There is some thought this could improve the therapeutics regime and help with survival rates

Oil prices struggled Friday on weaker than expected PMIs in Australia while Japan and Eurozone had tempered risk appetite, which looked set to finish the week on the front foot after Pfizer confirmed that its COVID-19 vaccine remains on track for a regulatory review in October.

Not only has the uptick in COVID-19 case counts globally causing oil traders to look over their shoulder but it has the same effect on purchasing managers around the globe.

Better than expected US PMI data

However, the US PMI data was better than expected and provided a modicum of comfort to the global recovery. But it was not enough to completely lift the oil market gloom as North American traders are concerned that the improving case count trends in the US may not continue through school reopening and into autumn months as social activities move indoors.

But also clouding the view is that wondering eyes and intense scrutiny is now shifting to the potential effect of OPEC+ quota catch-up adjustment effects through Aug/Sept, where laggard compensation is even more critical as Libya looks set to unleash more barrels.

Libyan ceasefire agreement

A new ceasefire agreement in Libya suggests the nation will be able to resume exports once the military blockade is lifted and will likely release more barrels on the market at a critical juncture when the OPEC+ alliance is easing production curbs.

Even uncertainty over Fed policy, which has strengthened the US dollar and less optimistically for oil prices, is also clouding the viewfinder.

With the markets moving into a soft contango and the front-month struggling to breakout topside even as broader risk market stabilises, traders have been reducing extended long position risk waiting for more precise signals on the OPEC catch up adjustment effects.

The market hasn’t turned bearish it is just not as bullish.

In the meantime, storms Marco and Laura are moving towards the Gulf Coast, where they could make landfall as hurricanes as early as Monday, prompting the evacuation of offshore rigs and sees the Panhandle residents hunkering down for another hurricane season.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp