27.07.202015:33 Forex Analysis & Reviews: Oil: Price of raw materials decreases again

Crude oil prices have moved into a negative correction this morning after gaining some strength late last week.

Market participants are seriously concerned about several points. First, investors are directing their views towards the escalation of the conflict between Washington and Beijing, which could significantly undermine the already not very positive market situation. Secondly, the next wave of the coronavirus pandemic is growing in the United States, with the number of infected cases rapidly increases daily.

The price of futures contracts for Brent crude oil for September delivery on the trading floor in London fell slightly lower by 0.09% or $ 0.04, which sent it to the level of $ 43.3 per barrel. Note that Friday's trading ended with a rise in the price of raw materials by 0.07% or $ 0.03, and the price stopped at $ 43.34 per barrel.

The price of futures contracts for WTI crude oil for September delivery on the electronic trading floor in New York is also slightly fell by 0.07% or $ 0.03, and sent it to the level of $ 41.26 per barrel. Friday's trading reflected an increase of 0.5% or $ 0.22, and the price reached $ 41.29 per barrel.

Thus, Brent crude oil over the past week was able to increase in value by 0.5%, while WTI rose even more by 1.3%.

The geopolitical situation in the world, particularly the conflict between the United States of America and China, began to recoup investors in the raw materials market. Another exacerbation happened on Friday, which allows us to say that further hostility between the countries will only grow. Recall that on the last working day last week, the Chinese authorities decided to close the US diplomatic mission in Chengdu, Sichuan province. This was a response to the US government's demand to shut down the Chinese consulate in Houston, Texas.

The situation on the oil markets is already quite tense now, and a new wave of conflict between the United States and China can only aggravate the situation. The recovery of the world economy from the consequences of coronavirus infection, which is going on rather difficult, may receive additional pressure, which is now completely useless, especially since the epidemiological situation is still quite aggravated.

But there is still progress made: in America, the number of cases recorded every day is starting to depreciate. In the states of Florida, California, Texas, the number of cases is gradually decreasing. Their daily number is already becoming less than 1,000 people. However, this does not mean give such assurance since the risk of a second outbreak still persists.

In order to understand whether the situation is beginning to stabilize, market participants should see a steady decline in the number of COVID-19 cases in about two or more weeks. Only then will it be possible to take a breath.

However, there is another important factor that is putting serious pressure on oil quotes - the increase in the total number of oil production facilities in the United States of America. As it became known at the end of last week, one unit started working again, which means that, possibly, there will be an increase in the extraction of raw materials in the country. The start-up was the first return to the operation of an existing plant after regular displacement reductions for more than four months. Thus, the total number of stations was 181.

All this suggests that production will increase in the long term. The demand for shale oil is gradually increasing, so as its price. However, no one can guarantee that the potential for price recovery in the oil market will not shake. Moreover, many analysts warn of an imminent correction, which can only exacerbate the situation.