29.07.202014:14 Forex Analysis & Reviews: Oil market continues to sink

The price of crude oil did not manage to break out of the negative zone on Wednesday due to the continuous decline. Nevertheless, several advantages can still be considered: the rate of decline is rather restrained and low, which allows us to speak of a less significant pullback.

The main expected news for oil today is the level of reserves in the United States of America. Changes in this indicator will dictate to a greater extent the further movement of oil prices.

The API data, which was released on Tuesday, reflected the decline in crude oil inventories last week until July 24 which amounted to 6.8 million barrels. At the same time, fuel (gasoline) stocks, on the contrary, turned out to be 1.1 million barrels higher, and distillates increased by 187 thousand barrels. At the strategically important terminal in Cushing, raw materials increased by 1.1 million barrels.

According to preliminary forecasts by analysts, official data on crude oil inventories last week should show a decrease of at least 1.2 million barrels. Gasoline stocks should also go down by about 2 million barrels. But the level of distillates is likely to remain unchanged, which is also not critical.

If the preliminary data turn out to be close to the official statistics of the United States Department of Energy, which will be presented Wednesday evening, the oil market will have at least some factor that can provide good support for the price. Otherwise, negative correction can accelerate its pace.

The price of Brent crude oil futures contracts for September delivery on the London trading floor fell slightly by 0.05% or $ 0.02, which moved the price of this mark to the level of $ 43.2 per barrel. Tuesday's trading ended with a decline where the price fell by 0.4% or $ 0.19, and thus stopped at $ 43.22 per barrel. Such uncertainty in the movement can still act as support, since a negative correction has been brewing for a long time, but a huge decline has been avoided so far.

The price of WTI light crude oil futures contracts for September delivery on the electronic trading floor in New York is also declining on Wednesday morning. So far, its level has decreased insignificantly by 0.19% or $ 0.08, which sent WTI to the level of $ 40.96 per barrel. Tuesday's trading also closed in the red: oil dropped quite substantially by 1.4% or $ 0.56, which forced it to drop to $ 41.04 a barrel. However, the black gold of this mark is holding above the level of 40 dollars per barrel, which is extremely important for further growth and support, and this gives hope that there will not be any too rapid reduction.

The weak pace of global economic recovery continues to put pressure on the oil market. Tension is exacerbated by the growing supply of raw materials, which was formed against the backdrop of an increase in the production of black gold in the United States, as well as the softening of the conditions and amount of extraction of raw materials for countries that have signed an agreement with the OPEC organization. According to some experts, the supply of raw materials on the market will grow for at least four months in a row until a stable balance emerges. This, of course, is a potentially negative factor for oil, which can significantly affect its price.

However, to this day, the main reason for the decline in prices in the hydrocarbon market remains due to the coronavirus pandemic. The end of which is not yet in sight. It is COVID-19 that continues to restrain the growth in consumption, on which prices on trading floors depend so much.

In the aggregate of these factors, it can be assumed that in the near future oil will not be able to part with the bearish trend, which, however, is unlikely to grow stronger.