Oil prices fell on Friday as traders corrected the extravagant gains of this week, pricing in concerns over Covid-19’s effect on the demand recovery.
Rystad Energy’s Head of Oil, Markets Bjornar Tonhaugen, has commented on the state of the market:
"Like with all commodities, in a trading market you buy on good news and sell when the dust settles.
This week blew quite a lot of bullish dust, as news of large crude stock draws sent traders on an oil-buying spree, raising prices to the mid-40 dollar level.
Such price increase may have been out of proportion, taking into account that oil production started rising this week, as OPEC+ started bringing back a part of its curtailed million barrels.
And that while Covid-19 keeps on expanding, not only in the US, Brazil and India, where it is full-blown now, but also at countries that thought they had contained it in Europe.
Keeping the price levels would be unrealistic and traders rushed to the task today to correct the gains, remembering the invisible enemy, Covid-19.
We are a bit conservative on the short-term and believe that the market is not ready to sustain another large price increase during the summer, with a recovery coming only later in the year, together with demand.
Yet traders have to trade and August will not likely be a sleepy summer month. OPEC+ compliance data and meetings, Covid-19’s expansion and the race between supply and demand are likely to keep us busy in the heat."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/07082020/oil-dips-correcting-weeks-extravagant-gains-over-renewed-covid-19-fears/