Oil Is Losing Ground Amid Worries About The Speed Of Recovery
Oil Video 11.06.20.
U.S. Federal Reserve Economic Outlook Puts Pressure On Oil
Recently, WTI oil managed to get closer to $40 per barrel after the increase in crude inventories, highlighting the bullish mood of oil traders.
However, the recent Fed’s economic outlook was too grim for the oil market – the Fed’s expectation of a 6.5% decline in U.S. GDP put pressure on WTI oil which declined towards $36.
The main intrigue for oil traders is the pace of oil demand rebound. The world economy has been reopening for over a month but travelling is still not allowed in many parts of the world while the pace of the economic recovery is uncertain.
The Fed’s outlook has highlighted the fact that the recovery will not be too robust. While the markets are supported by low interest rates and the unprecedented monetary stimulus, the real economy needs more time to recover from the negative effects of coronavirus containment measures.
I’d reiterate my concerns that oil inventories have recently increased despite continued production cuts and the driving season. The next’s week inventory report may have a significant negative impact on oil prices in case it shows that inventories have increased once again.
It’s Time To Monitor Coronavirus Numbers Again
Protests in the U.S. draw media attention in recent days, and virus-related topics took the back seat.
However, it looks like it’s high time to monitor the development of the pandemic as it presents additional risks for the oil market.
Currently, the U.S. has recorded more than 2 million coronavirus cases. Back in May, the U.S. economy started to reopen, and there are signs that this reopening may have led to spikes in COVID-19 cases in certain areas of the country.
Arizona has already told its hospitals to activate coroanvirus emergency plans as the number of cases was increasing rapidly.
A potential second wave of stay-at-home orders is a true nightmare both for the economy and the U.S. market. At this point, the available data is concerning but not disastrous. Thus, it’s high time to monitor coronavirus numbers more closely – in case the market comes to conclusion that the risk of the second wave has been minimized, oil will have more room to run.
For a look at all of today’s economic events, check out our economic calendar.