Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
Alexander Kuptsikevich
WTI Crude Oil Brent

The same with gold, whose rally has stalled a couple of steps below strong resistance at $1800.

For oil alone, the situation looks more optimistic. Brent quotes continue to rise, reaching $36.91 in the morning, which is close to the peak of April at $37.05.

Brent received an additional growth impulse on the US stockpiles data, released on Wednesday. Last week it declined by 5 million barrels, which was the second week of decline in volumes. At the same time, the American strategic reserves continue to replenish, having increased by 1.9M barrels.

Contrary to expectations, the reserves could not update the record of 2017, having started the wave of decline two weeks ago. Seasonality seems to have played a significant role in this. The growth of this indicator often occurs in March-April. However, traditionally there is then a decline: just in time for the beginning of the active auto season. Now we are witnessing precisely this pattern, further enhanced by purchases in the strategic reserve.

At the same time, there is a decrease in production, but it happens much slower than expected. Last week this indicator averaged 11.5M barrels per day (-0.1M for the week). In total, the decline from the March peak is 1.6M barrels per day, or slightly over 12%.

There is a big buyer in the market, which stores oil somewhere outside the US In normal times, fuel accounts for 65% of black gold consumption, i.e. more than 8.5M barrels of 13.1M produced in March. The demand for it fell by 40%, to about 5M. Let’s assume that the amount of fuel, which is used for electricity, remained unchanged, while consumption in manufacturing decreased by 5%-10%. It turns out that the balance in the US is slightly above 9.2M barrels per day. However, we are witnessing that even at 11.6-11.5 oil reserves are decreasing.

This leads to the idea that the commodity customers are indeed significantly increasing their oil purchases near the cyclical lows. However, this is also bad news for oil prospects. The overhang from reserves will hurdle price recovery and suppress demand for raw materials in the coming months, as countries reduce their stockpiles to average levels.

by Alex Kuptsikevich, the FxPro senior market analyst.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.