04.08.202012:04 Forex Analysis & Reviews: Morning fluctuations in oil price

Crude oil prices have plunged again this morning. Market participants are taking their profit after the massive rally that took place in the exchange markets yesterday. Seems like it has become a trend: every morning, there is a downward correction after which the price starts to increase sharply. The rally ends only the next morning. Most likely, such a situation has developed as a result of unstable positions of crude oil, which makes investors stop and analyze the ongoing events after each rally.

Brent crude oil futures contracts for delivery in October fell by 0.77%, or $0.34, during London's morning trading hours. The price began to consolidate at around $43.81 per barrel. At yesterday's closing, the price grew rapidly to 1.5%, or $0.63.

The price of WTI (West Texas Intermediate) futures contracts for delivery in September also decreased by 0.68%, or $0.28, to $40.73 per barrel at the beginning of the New York session. On Monday's closing, the price of WTI contracts increased by 1.8%, or $0.74.

On Monday, the price went up thanks to the fact that market participants gladly accepted the new statistics, which turned out to be much better than the preliminary forecasts. Thus, the business activity index in the manufacturing sector of the United States reached 54.2 in July, while a month earlier it was at around 52.6. At the same time, this was the highest result in over a year.

Meanwhile, experts forecast moderate growth of business activity, not higher than 53.6. This fact could not but pleased investors, who had already been through enough.

Among other things, market participants were pleased to hear the news about the third phase of clinical trials of the coronavirus vaccine, developed by the US pharmaceutical company Eli Lilly & Co. In general, any news about the possible end of the COVID-19 pandemic, has an extremely positive effect on market participants.

Even the transition to the second phase of the OPEC+ agreement, according to which oil-exporting countries are to increase production by 2 million barrels per day starting in August, could not cast shadow on investors' activity. In fact, some countries have violated the agreement and have failed to fulfill their commitments. Therefore, such an increase is unlikely to be large-scale. Thus, analysts project oil extraction to rise slightly above 1.5 million barrels per day.

Nevertheless, there are risks that even this oil surplus on the market, in the light of the ongoing coronavirus pandemic and the rapid increase in the number of new cases, could shatter demand amid oversupply.

Anyway, the number of new coronavirus cases in the United States has decreased over the past day, which is a good sign. Thus, the US reported more than 47,000 new cases of coronavirus on Monday, which has been the lowest daily increase over the last month.

Now, market participants will focus on the reserves data of crude oil in the United States. New statistics is set for release tomorrow, and if it is positive - that is, there is a reduction, then Brent oil may well jump above $45 per barrel.