Oil Is Losing Ground As Traders Remain Worried About Lockdowns

Oil Video 05.11.20.

Oil Fails To Continue Its Rebound As Demand Worries Persist

Today, most assets are in a rally mode despite uncertainty about the outcome of the U.S. presidential election. However, oil is losing ground as traders remain worried about the potential impact of lockdowns in Europe.

Greece has recently joined the list of European nations which were forced to announce a nationwide lockdown to deal with the surge of coronavirus. This lockdown will continue until the end of the month.

Denmark announced new anti-virus measures in certain parts of the country and also decided to eliminate the whole population of minks that are bred at the country’s farms as they could infect humans with coronavirus.

The key question for oil traders is whether Europe will manage to reopen its economy after November. If lockdowns are extended into December, oil will find itself under increased pressure.

Meanwhile, Saudi Arabia has reportedly cut its prices for the Asian market. The discount was modest so it’s hard to expect a big impact on oil prices, but it’s still a sign of a slowdown in demand.

U.S. Gasoline Demand Declines To 8.34 Million Barrels Per Day

Yesterday, EIA reported that crude inventories decreased by 8 million barrels, providing support to the oil market. However, gasoline inventories increased by 1.5 million barrels.

The latest data on gasoline demand explained the increase in gasoline inventories – gasoline demand declined from 8.55 million barrels per day (bpd) to 8.34 million bpd. A year ago, gasoline demand stood at 9.15 million bpd.

It should be noted that gasoline demand is expected to decline in the last two months of the year due to seasonality. However, this year is not a traditional year, so many bulls hoped that gasoline demand will continue to recover and get closer to last year’s numbers.

If demand for gasoline and oil in general does not continue to recover, the oil market will have to rely on support from the supply cuts made by OPEC+ members.

At this point, it looks like OPEC+ is ready to extend its current production cuts for the first months of 2021, but it remains to be seen whether this support will be sufficient enough to push oil back closer to recent highs near the $42 level.

For a look at all of today’s economic events, check out our economic calendar.