05.08.202014:53 Forex-elemzések és áttekintések: Oil market is experiencing severe hardship

This morning, the oil price was falling into a downward correction. The American Petroleum Institute report, which indicated that crude oil inventories in the United States dropped significantly last week, did not spark interest in market participants.

This decline cannot guarantee the balance between supply and demand in the oil market. Investors fear that demand will be much lower than extraction volumes in the near future. There are two main reasons for this. They are the second phase of the OPEC+ agreement on oil production cuts, which implies easing restrictions in August, and a high number of the coronavirus cases, which continues increasing.

The market situation only deteriorated after a series of explosions at the port of Beirut. Investors started to realize that things were not going very well in the Middle East, which, of course, could not but upset them. However, at the same time, it sets limits for the rapid fall in the oil market.

According to the report published by the American Petroleum Institute yesterday, the level of crude oil inventories in the United States dropped significantly by around 8.59 million barrels by the end of the last week. However, more accurate statistics is set for release today. Most analysts expect a 4.1 million barrels reduction in reserves of crude oil, and a 1.3 million barrels decrease in gasoline stocks. Distillates, on the contrary, are forecast to grow by 100,000 barrels. The current oil market situation is quite delicate as it will be extremely difficult to cope with the planned increase in the level of reserves. The second phase of the OPEC+ deal, which implies an increase in production by 2 million barrels, only aggravates the situation.

Also, worrying news continues to come from Saudi Arabia. According to Saudi Aramco, the announcement of new crude oil prices will be postponed, most likely, until September.

In this regard, it becomes clear that the hardship in the oil market is not temporary at all and can last for a couple of months. The very fact that a certain country has decided to postpone the release of prices already indicates that it does not have any idea about further price movement, as well as the level of consumer demand. Such a vague situation cannot be ignored by market participants.

Brent crude oil futures contracts for delivery in October fell by 0.11%, or $0.05, to $44.38 per barrel during London's morning trading hours. Yesterday, Brent grew by 0.6%, or $0.28.

The price of WTI (West Texas Intermediate) futures contracts for delivery in September also decreased by 0,26%, or $0.11, to $41.59 per barrel during the New York session. At the end of the trading session on Tuesday, the contracts increased by 1.7%, or $0.69.

However, today, there are signs that the price of oil will start rising again. The greenback is weakening. Yesterday, it forced oil to approach the strategically important mark of $43-45. If quotes manage to climb higher, the rally will only gain momentum. It is quite possible that the price will start soaring up today. Thus, market participants are getting ready for the rally.