Oil Suffers A Major Sell-Off Amid Virus FearsOil is trying to settle below $37.50 as traders are worried about the potential second wave of lockdowns in Europe and rising U.S. crude inventories.
Oil Video 28.10.20.
Oil Is Under Serious Pressure Amid Fears Of New Lockdowns In Europe
The world markets are in a sell-off mode today, and oil is no exception. The main reason for this sell-off is the fear of a second wave of lockdowns in Europe.
75% of retail CFD investors lose money
According to recent reports, France will soon issue a stay-at-home order which will tell people to stay at home except for work or essential exercise.
Meanwhile, the German newspaper Bild reported that Angela Merkel was pushing for a light lockdown from November 2. This lockdown is expected to close businesses like bars, restaurants and gyms in an attempt to contain the second wave of coronavirus.
While the upcoming lockdowns are not expected to be as strict as the lockdowns in spring, oil traders worry that they will put significant pressure on demand for oil.
At this point, it looks like oil demand will certainly suffer a blow, but the size of this blow remains uncertain. If the decline in oil demand is not as strong as feared, oil will have good chances to get back above the $40 level.
U.S. Crude Inventories Increase By 4.3 Million Barrels
Yesterday, API Crude Oil Stock Change report showed that crude inventories increased by 4.58 million barrels. Today’s EIA Weekly Petroleum Status Report confirmed that crude inventory levels have significantly increased.
According to EIA, crude inventories increased by 4.3 million barrels. Meanwhile, gasoline inventories decreased by 0.9 million barrels while distillate fuel inventories decreased by 4.5 million barrels.
Crude oil imports increased by 0.5 million barrels per day (bpd) and contributed to the increase of crude inventories. However, the main catalyst for the rapid inventory increase was the major growth of U.S. domestic production levels.
The U.S. domestic oil production grew from 9.9 million bpd to 11.1 million bpd. Finally, the rising number of U.S. oil rigs led to a major increase in domestic production levels.
It should be noted that the next week’s report may show a decline in U.S. oil production as Hurricane Zeta forced evacuation of offshore platforms in the U.S. Gulf of Mexico.
In total, EIA published a bearish report as crude inventories increased together with the U.S. oil production. Most likely, oil will remain highly volatile in the upcoming trading sessions as topics like European lockdowns, U.S. stimulus negotiations and U.S. presidential election will keep traders busy.
For a look at all of today’s economic events, check out our economic calendar.