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Crude Oil Fundamental Analysis (Brent crude oil futures fell sharply)

US West Texas Intermediate and international-benchmark Brent crude oil futures fell sharply with last week’s selloff after US President Donald Trump tested positive for COVID-19. Other catalysts behind the weakness were a stimulus package, a sluggish US labor market and lack of progress on rising global oil production. All these factors have combined to overcome a weak price recovery.

Trump Test Positive for COVID-19

The catalyst for the fall on Friday was the news that President Trump had contracted COVID-19. The news brought unstable moves in the financial markets and COVID-19 made headlines for investors. The White House announcement is expected to increase the current political uncertainty surrounding the US election on 3 November, another major risk event for markets.

OPEC crude supply rise

Crude supplies from Petroleum Exporting Countries (OPEC) rose to 160,000 barrels per day (bpd) in September, up from a month earlier, a Reuters survey showed.

The increase was primarily the result of increased supplies from Libya and Iran, members of OPEC who are exempted from a supply agreement between OPEC and Russia-led allies – a group known as OPEC +.

US drillers add oil and gas leak for a third consecutive week

US energy firms added oil and natural gas rigs this week for the first time in October 2018 for the third week in a row, with some producers re-drilling after price rises in recent months.

The oil and gas rig count, an early indicator of future output, jumped from five to 266 in the week to October 2, the energy services firm Baker Hughes Company said in its report on Friday.

According to Baker Hughes data up to 1940, the total rig count fell to a record level of 244 rigs during the week ending August 14.

According to Baker Hughes data, US oil rigs rose from six to 189 this week, the week lowest until June 19, while gas leakage dropped from one to 74.

US Energy Information Administration Weekly List Report

The EIA said on Wednesday that US crude oil and distillate inventories fell in the latest week as refiners raised processing rates, though fuel demand weakened.

Crude inventories fell 25 million barrels in the week to 492.4 million barrels from 25 September, with analyst expectations in a Reuters poll for an increase of 1.6 million barrels.

The EIA said that US gasoline stock rose 683,000 barrels per week to 228.2 million barrels.

EIA data showed that distillate stockpills, which include diesel and heating oil, fell by 3.2 million barrels a week.

Weekly forecast

We should find out earlier this week that the news of President Trump’s contraction of COVID-19 due to the fall in prices last week was dominated. Due to the weekend’s events and the uncertainty of the virus, last Friday’s news has become a day-to-day event, so traders are likely to approach the market with caution.

If Trump recovers quickly we are expecting a strong rebound rally. The fact that OPEC + production cuts remain intact is likely to provide support for crude oil, so any fast selling is expected to end with a soft end.

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About Dwipen Gogoi

Dwipen Gogoi, MBA (IB and IT) and PGDFT from Pune. (Technical Analyst of AliceBlue) I am a You Tuber, Blogger and doing Technical Analysis last 10 years in Stock, Commodity and Forex Market. i am creating various trading strategies for day traders, swing traders, scalp traders.

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