Yahoo Finance Crude Oil Price Update – Lingering Concerns Over Demand Helping to Cap Gains
U.S. West Texas Intermediate and international-Benchmark Brent crude oil futures are trading lower after an earlier short-covering rally failed to gain traction. The markets are posting inside moves on the daily charts which suggest investor indecision and impending volatility.
There were no major changes in the fundamentals overnight so the short-covering rally we saw can be blamed on position-squaring and some light profit-taking. Basically, the move was a temporary adjustment and designed to alleviate some of the selling pressure after a sizable two-day decline. I see nothing in the move or on the charts that suggest a structural change in the chart pattern or the fundamentals is taking place.
At 12:18 GMT, April WTI crude oil is trading $51.28, down $0.15 or -0.31% and April Brent crude oil is at $56.17, down $0.13 or -0.23%.
Demand Concerns at the Forefront
Uncertainty over future demand continues to weigh on prices. Traders are still trying to get a clearer picture on what demand will look like in the near future and during the second half of the year.
During the early stages of the coronavirus update, traders focused on its impact on China’s demand. At that time, most traders felt that the expected drop in demand would be easily offset by an additional production cut by OPEC and its allies. However, this assessment changed when the virus began to spread outside of mainland China.
OPEC and the International Energy Agency recently issued forecasts that called for lower demand in the short-run, but a pick-up in demand later in the year. However, those predictions were likely based on weak demand from China during the first quarter of the year.
It now looks likes China’s problems are going to extend into the second quarter. Furthermore, the virus has spread to South Korea, Iran and Italy, which means the demand numbers will likely drop further.
Don’t Count on OPEC Coming to the Rescue
Most traders attribute the recent two week rally to expectations of a “bailout” by OPEC and its allies in the form of additional production cuts. However, uncertainty over the actual loss of demand in the short-run is helping to keep OPEC+ on the sidelines. In other words, there are just too many lingering doubts as to whether the cuts will be necessary, and whether they will be enough to offset the loss in demand.
Saudi Arabia’s energy minister on Tuesday said that OPEC+ should not be complacent about the coronavirus. But Russia, is still sitting on its hands, unwilling to go along with the plan to trim output until they see some numbers showing how much demand will be affected.
Supply Reports
Crude oil inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due to be released at 21:30 GMT.
On Wednesday, the U.S. Energy Information Administration (EIA) is expected to announce that crude oil inventories rose for a fifth straight week, while refined products likely fell.
This article was originally posted on FX Empire
