Oil Failed To Develop More Upside Momentum Above $42.50Oil failed to settle above the resistance level at $42.50 as traders remain worried about the continued spread of coronavirus.
Oil Video 06.08.20.
In addition, the report showed that U.S. domestic oil production declined from 11.1 million barrels per day (bpd) to 11 million bpd. In short, the report was bullish, and oil had significant chances to develop more upside momentum.
However, oil faced resistance at $43.50 and fell back below $42.50. It looks like traders are worried about the negative impact of the second wave of coronavirus-related restrictions.
While nobody expects that any country will choose to go into full lockdown even if COVID-19 cases surge, partial restrictions will surely put pressure on the speed of oil demand recovery.
U.S. President Donald Trump has recently stated that the U.S. could have a coronavirus vaccine before November 3, 2020. Even under this very optimistic assumption, mass vaccination would not be possible until early 2021.
It is already clear that travel demand will not recover before the world has a vaccine. In Europe, which was hit hard by the first wave of the disease, countries are already implementing various quarantine measures.
In a latest move, Switzerland introduced a 10-day quarantine to travelers from all countries outside of Schengen area with a few exceptions. Such measures will surely hurt oil demand so oil traders will likely remain nervous until a vaccine is developed.
Iraq Promises To Make Additional Production Cuts In August
Iraq has stated that it will cut its production by 400,000 bpd at a time when other OPEC+ members are increasing their production.
Previously, Iraq was one of the countries that failed to cut its production in line with the original OPEC+ deal. Saudi Arabia has put significant pressure on laggards to bring them into compliance with the deal.
This pressure has yielded results as Iraq was forced to continue production cuts in August in fear that Saudi Arabia will supply oil to its clients at lower prices in case it failed to comply with the terms of the original deal.
This is good news for the oil market since Iraq’s production cuts will make the transition from prior production levels more smooth.
For a look at all of today’s economic events, check out our economic calendar.