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Oil prices continue to fall

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Oilfield Technology,


Oil prices are continuing to fall, with most concerns focusing on the US, where Covid-19 isn’t slowing down and road fuel demand trembles.

Rystad Energy’s daily market comment has been provided by Senior Oil Markets Analyst Paola Rodriguez-Masiu:

"Today’s oil price move is a clear sign that the market now seriously worries about the future of oil demand and not just plays a bearish-bullish daily trading game that sends prices swinging.

Hard earned gains have been erased, starting last week, and if you thought Monday was a depressing day, Tuesday is here to show that the price decline is not coincidental.

The streak of losses is driven by a stalling crude demand outlook for the rest of the year, with rising cases of Covid-19 and the end of the summer driving season in the US, as well as, Asian refineries putting on breaks.

Further deterioration of relations between the world’s first and second economies send additional chills to the market, with President Trump stating that he intends to “decouple” US economy from China.

Brent prices take a hit by bearish international trading news, but also looking at a worrying rise in Covid-19 infections in India, which now has become the second most affected country in cases count. Covid-19 has not really stopped its global expansion and economies -with them oil demand - continue to be affected.

But the oil grade most affected today is WTI, with more than a 3% decline. The difference between the WTI and Brent move today reveals much better than most days the sensitivity of WTI in US news. WTI is a US grade, much more sensitive to developments of the US market than the global benchmark Brent.

If anything, today’s price move show that most trading concern now falls on the US, where things are going south despite the market scrambling to find positive news to keep prices healthy.

Reports show today a spike in Covid-19 cases following the Labor Day weekend, a holiday crowded with gatherings and that also markets the end of the driving season.

The cocktail of more Covid-19 infections and an expected decline in road fuel demand in the US is strong enough to put healthier WTI prices to sleep for a while until the hangover is over.

With concerns about the future of demand pilling up, contangoes in both Brent and WTI futures curves have widened.

This, together will the tumbling of freight rates, will incentivise floating storage again, removing some pressure from the physical oil market and helping keeping prices at still-breathable levels."

Read the article online at: https://www.oilfieldtechnology.com/special-reports/08092020/oil-prices-continue-to-fall/

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This article has been tagged under the following:

Upstream news US upstream news Oil price news Oil & gas news