11.09.202015:41 Forex Analysis & Reviews: Oil faces big challenges: prices continue to fall

The price of crude oil continues to trade in the red zone on Friday. The black gold is under pressure after the release of the statistics on the level of crude oil and fuel reserves in the US on Thursday. In addition, market participants began to have huge doubts that the demand for oil raw materials would be able to maintain at least the current level, and not fall, as it happened in the spring.

As per the official figures from the Department of Energy, the total volume of commercial reserves of black gold in the US increased by 2.03 million barrels over the past week, which ended September 4. The level of gasoline inventories, on the contrary, fell by 2.95 million barrels, while distillates fell by 1.68 million barrels.

The American Petroleum Institute has initially released its report which showed a rather different data than that of the DOE. According to the API, the level of stocks of raw materials rose by 3 million barrels, and distillates by 2.3 million barrels. While the volume of gasoline reserves fell by 6.9 million barrels.

The price of futures contracts for Brent crude oil for November delivery on the trading floor in London decreased by 0.37% or $ 0.15, which moved it to $ 39.91 per barrel Friday morning. Note that Thursday's trading session also ended in the red zone with a drop of 1.8% or $0.73.

The price of futures contracts for WTI light crude oil for delivery in October on the electronic trading floor in New York also fell by 0.27% or $ 0.10 per barrel. Thus, its current level was around $ 37.20 per barrel. Thursday's trading also closed with a decline of 2% or $0.75.

All these negative trends of recent days are likely to lead to the fact that, in general, during the current week, crude oil of both brands was again marked by a reduction. And this will be the second fall in a row, which will not at all please investors.

Several negative factors are already affecting market participants. First on the list is the phase of acute conflict between the US and China. The parties are still unable to settle the issue of the trade agreement, which, however, is very close to complete abolition. The second factor is the unceasing increase in the number of coronavirus infections around the world and outbreaks in individual countries. Investors continue to closely follow the progress of clinical trials of the COVID-19 vaccine, but so far there is little positive news. Another factor of pressure is the problem of demand for oil raw materials. It is unlikely to be able to stay at the same level, so market participants are already preparing for its correction.

The decline in oil reserves did not please investors and analysts, as it became further evidence that the global demand for hydrocarbons is gradually decreasing. Earlier it was announced that oil imports to China amount to 11.23 million barrels per day over the last month of summer. This is lower than the previous figure which was within 12.99 million barrels per day. This drop, in turn, led to a revision of the forecast for global demand for raw materials for the entire current year, the figure was reduced by 210,000 barrels per day.

Now the main attention of market participants will be focused on the future meeting of the OPEC member countries, scheduled next week, September 17, 2020. Analysts point to the possibility of easing commitments to reduce oil production for countries that have signed an agreement with the organization, which may cause an increase in supply on the market, which means an even more rapid fall in oil prices.