Yahoo Finance Oil Under Pressure As Some Traders Lose Patience Waiting For An Upside Breakout
Oil Video 09.07.20.
Oil Does Not Have Enough Near-Term Catalysts To Get Above $41
Oil traded in a very tight range for six sessions in a row and a move out of the range between $40 and $41 was long overdue.
Currently, it looks like the first move may be to the downside as oil is trying to settle below the $40 level.
On Wednesday, the U.S. has reported more than 60,000 new cases of coronavirus, and some traders fear that the continued deterioration of the virus situation may lead to new lockdowns.
In addition, the recent inventory report did not provide reasons for optimism as crude inventories increased by 5.7 million barrels. Gasoline inventories decreased by 4.8 million barrels but that’s normal for the driving season. In fact, I’d bet that many traders expected to see better inventory dynamics.
Oil is a volatile commodity and it cannot stay glued near one level for many days. Ultimately, it will have to follow the path of least resistance. At this point, the risk may be shifting to the downside as the oil market simply lacks additional catalysts to continue the upside move, and a healthy correction may be due.
OPEC+ Will Not Extend Current Production Cuts For August
On July 15, the market monitoring panel of OPEC+ will meet to discuss the recent developments in the oil market. Currently, OPEC+ has agreed to cut production by 9.6 million barrels per day (bpd) until the end of July.
In August, production cuts will decrease to 7.6 million bpd so an additional 2 million barrels of oil will be supplied to the market.
The main intrigue is whether OPEC+ will prefer to provide additional support to the market and extend current cuts for August.
In my opinion, this will not happen. OPEC+ countries are struggling from lower levels of production while some countries like Russia may have problems maintaining current production cuts for technological reasons.
In addition, the U.S. domestic oil production has recently jumped from 10.5 million bpd to 11 million bpd. OPEC+ would not like to provide a “free lunch” for the U.S. oil industry and support prices when the market share of its competitor grows day by day.
In this light, oil will need healthy upside in demand to get above the recent trading range since some of the curtailed supply will soon return to the market.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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