06.08.202012:16 Forex Analysis & Reviews: Oil prices went up, but there are still many signals for a correction

Oil is slowly moving up today, in contrast to its tremendous jump yesterday that pushed the quote to reach the highest price levels in the last five months. The reason for it is the reduction of oil reserves in the United States, which was announced by the US Department of Energy, following the results of last week.

Thus, Brent futures for October delivery rose 0.42%, or $ 0.19 in the London trading floor this morning, bringing crude to a price level of $ 45.36 a barrel.

WTI futures for September delivery, meanwhile, rose 0.14%, or $ 0.06 in the New York trading floor this morning, bringing it to a price level around $ 42.25 per barrel.

The good news is that both oils managed to achieve a stable growth, even reaching very high values, which had not happened since the beginning of March this year.

Unfortunately, the same cannot be said for crude reserves in the United States, as it significantly decreased to 7.3 million barrels over the past week. At the same time, gasoline reserves have become slightly larger by 419 thousand barrels, while distillates rose by 1.592 thousand barrels. Raw materials in Cushing also increased by 532 thousand barrels.

These data differ from analysts' expectations, as the forecast for oil reserves was a decline of about 4.1 million, a drop in gasoline reserves by about 1.3 million barrels, and an increase in distillates by about 100 thousand barrels. Nevertheless, the reduction that took place was enough for investors to begin more active work in the market, bringing oil to new record levels.

So, the API report, which was released on Tuesday this week, reflected a decrease in US oil reserves by 8.59 million barrels.

However, the biggest threat to the market is still present. The coronavirus pandemic continues, and the rapid increase in infections is only gaining momentum, which forces some countries to return to restrictive quarantine measures. All this makes market participants worry about the balance between supply and demand in the oil market. If under the OPEC agreement, there becomes a softening in production volume in August, the situation could become even more tense.

Many analysts have become wary of the significant growth that has emerged in the market in recent days. They believe that this is just temporary, the duration of which will be due to a short-term trend. In addition, there are many factors that will put pressure on raw materials and prevent them from going too far. Among them is an increase in oil production amid weak demand in the market.

The nearest negative correction may become very serious, so experts advise to prepare for it in advance.