Oil Continues Attempts To Gain Upside MomentumOil continues to trade above the key $40 level but fails to get above the next resistance level at $41.50.
Oil Video 07.07.20.
Saudi Arabia Increases Prices Again
While traders watch the daily fluctuations of oil futures prices, most oil is sold on contracts in the real world.
Saudi Arabia has just raised the prices for its oil that is scheduled to be delivered in August. According to a Reuters report, the price for Asian buyers was increased by $1.20 above the Oman/Dubai average price.
Recent reports indicated that China’s crude oil imports were at record levels in June so Saudi Arabia is using the increase in demand to improve pricing.
It’s worth noting that OPEC+ is set to transfer from production cuts of 9.6 million barrels per day (bpd) in July to 7.6 million bpd in August so Saudi Arabia believes that the market will be ready to take more oil at higher prices. This is a bullish view.
Saudi Arabia’s decision has certainly provided support to the oil market and helped oil stay above the key $40 level. However, oil fails to get more upside momentum above this level.
In my opinion, the key reason for this is the fear that the continued spread of coronavirus will lead to new lockdowns and put pressure on economic activity and demand for oil.
Melbourne Is The First Major City To Reimpose A Lockdown, Raising Questions About The Rebound Of Oil Demand
While the coronavirus situation continues to get worse in the U.S., states have mostly limited themselves to closing restaurants, bars and gyms and tried to persuade people to wear face masks in order to control the spread of the disease.
Such measures put pressure on economy and jobs but do not directly hurt the demand for oil.
In Australia, the city of Melbourne faced a surge in the number of coronavirus cases and had to reimpose a lockdown for six weeks. Such a scenario is a true nightmare for the world markets if it gets repeated by other big cities.
At this point, the stock market is only slightly worried about the virus while traders are waiting for new inventory data to evaluate whether demand is rising fast enough to lead to a decrease in inventory levels.
In this situation, oil may continue to ignore the developments on the coronavirus front but additional news about lockdowns will be very dangerous for the current upside trend.
For a look at all of today’s economic events, check out our economic calendar.