01.10.202011:52 Forex Analysis & Reviews: Oil market sees hope as prices start to stabilize

Crude oil prices show stability Thursday morning which is already a good sign against the backdrop of the swings that have been taking place over the past few weeks. Black gold received huge support on Wednesday in light of the news about the reduction of the level of raw material reserves in the US for the third week in a row. Market participants were extremely encouraged by this state of affairs, but there was still some negative data. According to the summary of the results of the dynamics of the cost of crude oil for the first month of autumn, both Brent and WTI prices declined at the end of the month, and this happened for the first time in the last five months.

Investors continue to monitor the situation with the coronavirus pandemic as well as the reimplementation of restrictions in certain countries in order to contain the outbreak. At the moment, statistics on COVID-19 are not encouraging. Several countries in Europe have started announcing the need to re-introduce quarantine, otherwise, the situation may worsen. But it is the restrictive measures that frighten market participants the most, as it causes significant damage to economic growth, and therefore significantly puts pressure on the oil market.

In this regard, demand for crude oil will remain under pressure, although at present, it looks more or less stable. However, this stability is significantly lower than that observed a year earlier. In such conditions, it is not necessary to hope that black gold will suddenly move to rapid growth. Nevertheless, it is quite possible to recoup the losses of recent weeks on the recent good news.

According to the official report from the US Department of Energy, the level of crude oil reserves in the country declined by 2 million barrels last week, which ended September 25. Thus, their total volume is now 492.4 million barrels. This was slightly higher than the initial estimate of 1.9 million barrels. Of course, this had a positive impact on the mood of investors. However, analysts were quick to draw the attention of market participants to the fact that the level of reserves in the strategically important storage facility in Cushing, on the contrary, is growing. Over the past week, this figure increased by 1.8 million barrels.

The risks in the oil market are only increasing, which forces quotes to move down. And with the anticipation of the second wave of the coronavirus pandemic, the negativity only increases. In addition to this is the expected oversupply in the oil market in the near future, as some countries have actively started to increase their production volumes, particularly in Libya.

The price of futures contracts for Brent crude oil for delivery in December on the trading floor in London rose slightly by 0.09% or $0.04, which sent it to the level of $42.34 per barrel. Wednesday's trading session ended with an increase of 1.8% or $0.74.

The price of futures contracts for WTI light crude oil for November delivery also rose slightly by 0.1% or $0.04, and its current level was at $ 40.26 per barrel. The brand also increased by 2.4% or $0.93 on Wednesday.

Following the results of the first month of autumn, both brands of crude oil began to cost less. Brent reduced its price by 9.6% in September, and for the second quarter sank by 0.5%. The price of WTI decreased by 5.6% in September, and at the end of the second quarter increased by 2.4%.

According to most analysts, in the future, the main driver of the cost of crude oil will be the US dollar exchange rate. If it continues to fall amid the proposal of a new stimulus package, black gold will receive support which will cause prices to rise.