Oil is trading sideways this morning following a long Independence Day holiday weekend for US traders. Declining oil production is counteracting the rising COVID-19 cases, keeping markets in limbo.

US active oil rig counts continued their decline, falling to just 185 rigs according to Baker Hughes data released on Friday. Including natural gas rigs, total US rigs fell to 263 last week, down by two and setting a new record low.  Last Monday, we reviewed a survey of energy producers, and almost half of the surveyed executives believed idled rigs could be reactivated with prices at current levels near $40/bbl. The question now is whether producers are idling rigs to ensure oil prices continue climbing, or whether they need prices to rise before they can bring those rigs back online.

Adding pessimism to the outlook, Citi analysts last week forecasted that oil demand will never recover to pre-pandemic levels. Their outlook suggests that consumers and business travels have now tasted the possibility of tele-conferencing and stay-at-home experiences. Some businesses have already announced plans to go fully remote for employees, and others may remain partially remote going forward. While the low-demand trends may be true for developed nations, future economic growth and poverty reduction in developing economies will continue lifting fuel consumption as more consumers spend spare income on vehicles and travel. Don’t count out global oil demand just yet.

Crude is quiet this morning following a robust closing price above $40 on Thursday. Today, crude oil is trading at $40.51, down 14 cents.

Fuel prices are trading mixed today. Diesel prices are trading at $1.2450, up 1.4 cents and now trading above gasoline prices, suggesting traders are more bullish on the economy overall than they are on consumer demand. Gasoline prices are trading at $1.2430, down 1.6 cents.