Home Gold News Oil Dips Amid Glut Supply Concerns And Demand Fears

Oil Dips Amid Glut Supply Concerns And Demand Fears

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  • Oil Glut Concerns
  • U.S Oil Crude stockpiles build-up
  • Oil Demand Recovery Fears

A spike in U.S crude inventory continues to pile pressure on oil prices, which are struggling to stay above the $40 a barrel level. Prices were slightly lower, Wednesday morning, as traders remained wary of a spike in coronavirus infections likely to curb economic recovery and oil demand.

Oil Stock Piles Build Up

Brent crude prices were down 0.14% to $43.2 a barrel as West Texas Intermediate Futures slipped 0.12% to $40.58. The slide came amidst heightened fears in the oil markets that a build-up in U.S inventory could lead to a glut in supply.

Time                            : 07-08-2020

Pivot                           : $40.45

Technical View           : Long Above $40.65

Targets                        : $40.85 – $41.16 – $41.53 – $42.09

Comments                  : Weak Bearish to Neutral

Last Price                    : $39.89

Technical View           : Short below $40.25

Target                         : $40.05 – $39.83 – $39.37 – $38.90

According to the American Petroleum Institute, there was a 2 million barrel build in crude oil supplies for the week ended July 3, 2020. In contrast, there was an 8.156 barrel draw the previous week. A spike in crude stockpiles at the back of a spike in coronavirus cases in the U.S, the largest consumer of oil, raises serious supply concerns.

Production cut’s imposed by the Organization of Petroleum Exporting Countries is poised to expire at the end of the month, another development that continues to weigh on sentiments in the oil markets. While there are plans for smaller cuts to remain in place, the uncertainty of how the cuts will proceed should continue to weigh on prices going forward.

Oil Longterm Outlook

The U.S Energy Information Administration expects U.S crude production to drop by 600,000 barrel a day in 2020 in response to the low demand fuelled by the COVID-19 pandemic. However, it is a smaller decline compared to a 670,000 bpd decline projected initially.

The decline could be attributed to the fact that a number of companies are struggling to stay afloat, given the low oil prices. Some companies have already filed for bankruptcy protection. Things should bounce to normal in 2021 with EIA expecting the global oil demand to surge to 101.1 million barrel per day.

Looking ahead, the focus will be on the release of EIA Cushing Crude oil stocks and EIA Distillate stocks change.

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