Brent crude oil futures, an international benchmark at the West Texas Intermediate in the US, fell sharply last week, as weaker ones finally threw the towel amid market demand fluctuations for the past four weeks.
Two stories dominated the price action – an unexpected Saudi price cut and an increase in US inventions – but there were other factors contributing to the weakness.
Last week, December WTI crude closed at $ 38.08, down $ 2.51 or -6.18%, and December Brent crude oil down $ 2.75 or -6.80% at $ 40.43.
Weakness Comparison The stock index, as well as the US economic indicators, had a second consecutive weekly decline, suggesting a long and difficult recovery from the coronavirus epidemic.
Additionally, making the market mood even more frightening, the US Senate struck down a Republican bill that would have provided nearly $ 300 billion in new coronavirus assistance. In a sign of another recession, traders began to book tankers again to store crude oil and diesel, amid ongoing economic recovery over the COVID-19 epidemic.
Saudi Arabia unexpectedly cuts prices for Asia
Saudi Arabia, the world’s top oil exporter, cut October’s official selling price for Arabian light crude, which sells by Asia’s largest margin after May. Asia is the largest market in Saudi Arabia.
The price cut set for October shipments, a sign that the world’s largest exporter may have seen fuel demand amid a flare-up in coronavirus.
US government report surprise list building
US government data revealed a weekly increase in US raw materials, which was on a six-week consecutive decline, raising expectations of an oversupplied market as uncertainty surrounds demand for demand.
The Energy Information Administration (EIA) reported that US raw material inventories increased by 2 million barrels at the weekend on 4 September – the first weekly increase in seven weeks. Traders were looking for a decline of 3.1 million barrels.
Total US raw material inventories, excluding those in the Strategic Petroleum Reserve, are about 14% above the five-year average for this time of 500.4 million barrels per year.
The EIA also reported a major drop in crude refinery runs to 1.1 million barrels per day for the previous week, making it the first domestic crude-stock in weeks. This was the result of refinery damage from Hurricane Laura.
Meanwhile, gas supply declined by 3 million barrels, while distilled reserves declined by 1.7 million barrels. A survey by S&P Global Platts had predicted a decline in the supply of 2.5 million barrels for gasoline, but the distillery was expected to grow 300,000 barrels.
Additionally, EIA data also showed crude stock in Cushing, Oklahoma, with the storage hub rising nearly 1.9 million barrels for the week, while total domestic oil production climbed 300,000 barrels per day to 10 million barrels.
As long as there is a wave of short-covering or profits in the works, sellers should dominate the business this week. At the beginning of last week, there was little demand that market driving could be reduced. After EIA data was released, we can now add oversupply concerns to a growing list of bearish factors weighing on prices.
As the U.S. summer driving season draws to a close, Washington’s policymakers have failed to pass provocative legislation and COVID-19 cases, making it difficult to tell that until prices hit a major market area, the market Where will the demand to roam around come from?
We expect to see a resurgence of buyers on a test of $ 34.82 to $ 32.58 (December WTI). This price range represents the best near term price region.