Brent Crude Oil correction to find support at $35 - OCBC

Marco Green
June 15, 2020

So, is the OPEC's effort to bring stability in the oil market by playing the supply cut card going in vain?

West Texas Intermediate crude for July settlement fell 8 cents to settle at $36.26 a barrel on the New York Mercantile Exchange.

Oil prices fell on Friday, extending heavy overnight losses as a surge in U.S. coronavirus cases this week raised the prospect of a second wave of the Covid-19 outbreak hitting demand in the world's biggest consumer of crude and fuel. Global crude consumption will return to about 95 million barrels a day by December, the trading house's Chief Executive Officer Marco Dunand said in an interview Thursday.

The threat of a protracted recovery may put pressure on OPEC and its allies to cap production throughout 2020, and the group may take further steps to rebalance the energy market as the most recent Monthly Oil Market Report (MOMR) warns that "in 2020, world oil demand growth isadjusted lower by 2.23 mb/d and is now forecast to drop by 9.07 mb/d".

Howie Lee, an economist at OCBC Bank, thinks the market may be experiencing a correction in the Brent Crude Oil price toward the $35 support as the inventories recorded a high the last week.

The country's oil minister later said it would export an average of 2.8 million bpd in June.

While the fall in the oil market was evident, some independent analysts believe that it was a result of a speculation and market panic considering the sharp build up in the US commercial inventory, and the long-term prospect of oil would depend upon the demand from China and many other oil-consuming nations.

Nonetheless, Thursday's tottering of the crude oil futures' prices was nearly entirely galvanized by a sudden uptick in US crude oil inventory alongside a slanderous demand outlook which was endorsed just yesterday by the US Federal Reserve, while a dive of roughly 20 per cent in fuel consumption level despite an easing off of the lockdowns in most of the US states had added to further worries.

The low of the session was the mark of$. per barrel.

Total U.S. coronavirus cases topped 2 million on Wednesday, with new infections rising slightly after five weeks of declines, according to a Reuters analysis.

The OPEC+ plan to cut production is helping to underpin prices, while demand concerns may have helped put in a short-term top.

Other reports by Click Lancashire

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