Home Broker News Oil Prices Drop From 2-Week Highs Amidst Glut Fears

Oil Prices Drop From 2-Week Highs Amidst Glut Fears

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  • Oil Glut Supply
  • Coronavirus reinfections Concerns
  • Shrinking Oil Stockpiles

A persistent glut in supply compounded by gloomy economic outlook is the latest tailwind that threatens to bring to an end two consecutive weeks of oil price gains. Oil prices are yet again under pressure, slipping by more than 1% in early Monday trading session, as supply continues to outweigh demand in the markets.

 Oil Sell-Off

Brent crude futures were down by 1.7% in Monday trading session to $30.46 a barrel as U.S West Texas Intermediate crude futures dropped 2% to $24.25 a barrel. The slip came at the backdrop of two weeks gains in the aftermath of prices slipping to record lows at the peak of the COVID-19 pandemic.

Daily Chart

Time                            : 11-05-2020

Pivot                           : $24.34

Technical View           : Long Above $24.54

Target                         : $24.74 next 3 targets are $25.08, $25.37 and $25.96

Comments                  : Weak Bearish

Last Price                    : $24.22

Technical View           : Short below 24.14

Target                         : $23.94 next 3 targets are $23.91, $22.92, and $24.80

Weekly Report

Time                            : 11-05-2020

Pivot                           : $24.51

Technical View           : Demand Zone

Target                         : $22.25 and $29.28

Technical View           : Supply Zone

Target                         : $26.93 and $19.90

Oil Outlook

Oil prices had initially edged higher as demand started to pick up on countries easing lockdown restrictions designed to curb the spread of the deadly virus. Concerns over the second wave of coronavirus infections in China, as well as South Korea, appear to be fuelling sell-off in the oil markets.

A second wave of infections raises serious concerns as to whether demand will rise to a point where it addresses the glut in supply in the market. The last thing that oil markets want now is continued lockdowns as they are likely to keep demand subdued at record lows, leading to a further drop in prices.

Global oil demand is down by more than 30% as the COVID-19 pandemic continues to curtail movement on roads as well as in the air. Low demand has seen storage facilities run out conversely, triggering negative oil prices in recent months.

Record low oil prices have already forced many oil-producing companies in the U.S to shut down operations. Oil and gas rigs have already dropped to record lows of 374 with the situation showing no signs of improving.

Amidst the bearish outlook in the oil market, hedge funds in the U.S continue to increase their bullish bets on West Texas Intermediate crude. Likewise, oil stockpiles in China have shrunk in recent weeks after swelling to record highs.

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