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Demand Worries Weigh On Crude Oil

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WTI Crude oil futures fell to a three month low near $36 per barrel last week on demand worries and a drop in the US equities.The US Energy Information Administration (EIA) noted in its latest Short-Term Energy Outlook (STEO) yesterday that oil market outlook remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve.

Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020. EIA expects inventory draws in the fourth quarter of 3.1 million b/d before markets become relatively balanced in 2021, with forecast draws of 0.3 million b/d. Despite expected inventory draws in the coming months, EIA expects high inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices. EIA forecasts monthly Brent spot prices will average $44/b during the fourth quarter of 2020 and rise to an average of $49/b in 2021 as oil markets become more balanced.

Crude oil production in the United States has risen in recent months after declining from 12.7 million b/d in the first quarter of 2020 to a recent low of 10.0 million b/d in May. EIA estimates US crude oil production increased to 10.8 million b/d in August. Production has risen as tight oil operators have brought wells back online in response to rising prices after curtailing production amid low oil prices in the second quarter.

Oil prices were mixed on Monday :

Oil prices were mixed on Monday with U.S. crude rising as a tropical storm in the Gulf of Mexico forced rigs to shut down, but the gains were kept in check by wider concerns about excess supply and falling demand for fuels. Both contracts ended last week lower, a second consecutive week of declines. Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane. The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region. In Libya, Commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market, although it was unclear if oil fields and ports would begin operations.

TREND : WEAK BEARISH / SIDEWAYS

Time                                      :           14/09/2020

Pivot                                      :           37.42

Technical View                     :             LONG ABOVE 37.62

Target                                   :            37.82, 37.97, 38.12, 38.52

Technical View                     :             SHORT BELOW 37.22

Target                                   :            37.02, 36.72, 36.47

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