06.07.202013:21 Forex Analysis & Reviews: Oil stopped to rally as markets paused

This morning, the price of crude oil did not show a single dynamic. Prices diverged on different sides.

The price of Brent crude oil futures for delivery in September on a trading floor in London went up by 0.68% or $ 0.29, which moved it to the mark of $ 43.09 per barrel. Recall that the Friday trading session ended in the negative zone with a decline in the value of 0.79% or 0.34 dollars, and the final price mark was at the level of 42.8 dollars per barrel.

Oil futures of the WTI brand with delivery in August on the trading floor in New York, on the contrary, began a new day with a downward trend. Its value fell by 0.34% or 0.14 dollars, and it is currently in the region of 40.51 dollars per barrel. The price of this brand is above strategic importance for strengthening the mark of $ 40 per barrel, however, if the trend does not change, oil can sag even more.

In general, over the past week both brands were able to increase their costs. And these increase turned out to be more than 4%, which is very good in conditions of total uncertainty.

Meanwhile, the price of black gold last week moved up, forcing investors to rethink the possibility of a swift and confident market recovery. Good statistics were hinted at by good statistics on the growth of the economy of the United States of America, which began to arrive on the eve of the holidays. Nevertheless, growth fell slightly by Friday. The attention of market participants was drawn to the decrease in oil reserves in America, as well as fairly strong labor market indicators. It was these data that allowed oil to strengthen to positive dynamics.

However, several negatives were also observed. Most of it came from news on the increase in the number of new cases of coronavirus infection in the United States and the world as a whole. Against the background of the spread of the disease, the country's authorities again decided to start introducing restrictive quarantine measures to prevent a new outbreak of the disease. Such a decision, of course, cannot please investors who are just looking to rapidly strengthen the market, and now a real threat of another wave of the crisis has emerged.

Against the backdrop of such an unstable epidemiological situation, market participants began to closely monitor the situation of the movement of US residents during the holidays on the occasion of Independence Day. On one hand, an extended weekend can play a trick in the situation of the spread of infection throughout America and return the country to even tougher quarantine, while on the other hand, too restrained activity on trips will also indicate a fall in demand for fuel.

Most experts are inclined to believe that the price of oil this week will be in the negative zone. Raw materials are waiting for a general reduction in statistics on the movement of Americans during the holidays.

In any case, investors need to prepare for more reduced demand, as people taught by the bitter experience of the first wave of the pandemic will prefer to stay home. And this is further evidence that the pace of recovery in the oil market is not as fast as market participants hoped.

Meanwhile, pressure on the market also comes from OPEC. So, investors began to worry about the fact that the deadline for the contract to reduce oil production is coming to an end this month. This means that July will be the last month of a record decline, which should reach 9.7 million barrels per day by agreement. Starting next month, production will increase, and the reduction will be at around 7.7 barrels per day. In view of this circumstance, it is completely unclear how the oil prices will react, and most market participants will move to a wait-and-see position. Note that the next meeting of the members of the OPEC ministerial cabinet is scheduled on July 15.

The ninth consecutive decrease in the number of oil and gas production stations in the United States of America added to the positive news. Despite the fact that the general rate of decline has become slower, the state has broken another record for their minimum number. However, some manufacturers, on the contrary, hastened to take advantage of the situation with the increase in the cost of oil raw materials and switched to active production and processing in the hope of higher earnings.

Nevertheless, the main factor of pressure on the price of black gold this week remains a difficult situation with the increase in the number of patients with coronavirus infection in America. If the authorities fail to take control of it, the consequences for the oil market can be extremely dire. At least, many market participants have now chosen to remain in a position of expectation and curtailed their active actions.