Don’t look now, but there could be danger ahead for U.S. crude. As we’ve said since the beginning of this crisis, demand is driving market outcomes, and COVID-19 is driving demand. As of this writing, COVID-19 infections are surging across the country (and globally), as new 7-day averages of U.S. infections have risen every day since June 15^th. Despite rising caseloads, many governors have insisted they will not institute additional stay-at-home orders. Still, it’s worth noting that gasoline demand started falling before priorlockdown orders were issued, as consumers responded to a global pandemic by limiting in-person interactions and avoiding unnecessary car travel. Even in the absence of lockdown orders, we expect consumers and businesses to adjust their behavior, scale back activity, and reduce consumption of transportation fuels.

As we’ve said from the beginning, crude and products demand will suffer until the virus is contained through suppression, therapeutics, or a vaccine. If the virus continues to spread domestically, U.S. demand could falter, leading to another crude storage build up. More positively, recovering economies across Europe and most of the Indo-Pacific could support exports.