Oil Tries To Rebound After Yesterday’s Sell-Off

Oil Video 25.06.20.

Demand For Oil Is Recovering As Cars Get Back On The Roads

According to a recent Reuters report, the road trafic in some of the world’s biggest cities has already returned to levels seen in 2019. While this increase in traffic is not happening everywhere and is dependent on the virus situation, it is a sign of continued improvement of the supply/demand balance which could provide additional support to oil prices.

Yesterday, the oil market was shocked by the sudden increase in U.S. domestic oil production which was accompanied by an increase in crude oil inventories.

The increase in the domestic oil production is a bearish catalyst for WTI oil since it means that oil prices near $40 are sufficient enough to encourage additional production.

If this trend is confirmed by the next EIA Weekly Petroleum Status Report, oil could find itself under additional pressure. Elevated inventory levels are the main problem that the market is facing right now since production cuts have mostly solved the problem of excessive supply.

A surge in domestic oil production will slow down the return to normal levels of inventories and could prevent oil prices from reaching higher levels. However, it remains to be seen whether the recent increase of domestic oil production was a one-time event or a beginning of a new upside trend.

For Now, The Bullish Trend Stays Intact

Yesterday, oil was hit by a double blow from the increase of U.S. domestic oil production and the surge in the number of coronavirus cases in some U.S. states.

However, these serious developments were only sufficient enough to cause a one-time sell-off. Today, oil is trying to recover the lost ground.

The key question is whether oil traders will stay focused on the future which should be brighter for oil as demand continues to recover or choose to pay attention to current problems.

At this point, the market is focused on future developments so the problems with the virus and the increase in domestic oil production are viewed as temporary obstacles, which is bullish for oil.

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