In the recent weeks the United States has seen the largest one-day increase in coronavirus cases, and the State of California, along with several others, have reintroduced some restrictive measures. This has just raised investors’ concerns regarding a possible return of COVID-19 on a larger scale and in the event of further spread this event leading to a decline in fuel demand and, consequently, an overall decline in the price of oil on the global commodity market. In relation to this, economic correspondents report a possible decline of up to 10 percent on current prices.
On 2 July 2020, the sentiment in oil markets has been bullish and after a previous small decline in its price its price is currently strengthening again. According to analysts, this is only a small correction of the business trend, balancing the current match of supply and demand, along with the collection of profits made by investors in the previous period. On 2 July 2 at 8:33 am CET, West Texas Intermediate (WTI) light oil traded on the New York Mercantile Exchange (NYMEX) commodity market at US$ 39.99 per barrel, with a daily gain of +0.43%. However, according to the data of the technical analysis, WTI oil still shows a decrease in its value since the beginning of this year 2020 by -31.49%.
In an annual comparison, this decline in the price of WTI oil represents a decrease in its value on the commodity market by -26.26% of its previous price in the last 52 weeks. At the same time the European counterpart of WTI oil, the North Sea oil Brent, was also trading on the Intercontinental Exchange Europe (ICE) commodity market in the bull market trend, reaching a value of US$ 42.29 per barrel with the current daily increase of +0.62%. The fall in Brent crude oil prices is more balanced than the WTI crude oil prices, but the price drop is also significant. Since the beginning of 2020 Brent crude oil has lost its value by -32.36% of, and in the annual comparison it means a decrease of -31.25%.
Financial strategists fear a sharp rise in the heavily populated US states, which are among the country’s largest fuel consumers. According to Reuters, new cases of COVID-19 in the United States increased by nearly 50,000 on Wednesday, 1 July, the highest one-day peak since the beginning of the pandemic. More than half of the new cases each day are in Arizona, California, Florida and Texas. However, oil prices rose in the previous session after data from the US Energy Information Administration (EIA) showed that US oil reserves had fallen from a record high in recent weeks by 7.2 million barrels, much more than analysts had expected because the refinery increased production and imports decreased.
However, analysts noted that the data also showed that gasoline inventories had risen due to a sharp rise in imports compared to expectations of declining inventories. “Counter-seasonal builds in gasoline inventories as stockpiles unexpectedly rose are not precisely a bullish delight,” said AxiCorp strategist Stephen Innes. “The EIA data showed that gasoline imports hit the highest level since last August and peaked the most on a seasonal basis in nine years”. All eyes will be on the driving activity in the United States during the upcoming holiday weekend on 4 July, and on how quickly American manufacturers will revive shut-in production, analysts said.