Oil Tries To Settle Above The $36 Level In A Volatile Trading Session

Oil Video 02.11.20.

Oil Managed To Rebound After Sell-Off

Oil has recently tried to settle below the $34 level but gained significant upside momentum and is currently testing the $36 level.

Interestingly, the recent news were clearly negative for the oil market. UK Prime Minister Boris Johnson put England under a lockdown for a month while Italy’s Prime Minister Guiseppe Conte announced that the country’s government will have to introduce additional virus containment measures, including restrictions on travel and a nighttime curfew.

While these developments will surely put pressure on the oil demand in the near term, the situation is not as dire as in spring since demand continues to rebound elsewhere.

For example, China has recently reported that its Manufacturing PMI increased from 53.0 in September to 53.6 in October while U.S. Manufacturing PMI grew from 53.2 to 53.4. Both reports were better than analyst expectations and provided some additional support to the oil market as the strength of the manufacturing segment leads to increased demand for energy.

It remains to be seen whether the support from the economic data will be sustainable, but it looks like oil will need additional negative catalysts to get below the recent lows as some traders see lockdowns as a temporary problem.

The Number Of U.S. Oil Rigs Continues To Increase

The latest Baker Hughes Rig Count report indicated that the number of U.S. rigs drilling for oil increased by 10 to 221.

The previous EIA Weekly Petroleum Status Report showed that U.S. domestic oil production increased from 9.9 million barrels per day (bpd) to 11.1 million bpd despite the challenges posed by the hurricane season.

Most likely, the U.S. domestic oil production will continue to increase together with the number of U.S. oil rigs. This is a worrisome development for the market as it comes at a time when  demand for oil is reduced by lockdowns in Europe.

Traders will certainly pay attention to the new inventory reports which will be published this week. The previous crude inventory report from EIA indicated that inventories increased by 4.32 million barrels. If the next inventory report shows that inventories continue to increase at an alarming pace, oil may find itself under significant pressure.

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