Oil prices resumed an upward move and are gaining more support this week. However, prices are pressured by the lowering optimism of leaving the acute phase of the pandemic behind. New pest holes have occurred in China and Japan. Mass street protests in the United States and in Europe are also raising concerns not only about the slow down of business distribution once more, but also about the chance that these could become new hot spots for the pandemic. The number of new infection cases are rising on a worldwide scale. This might be a clear warning for a possible second wave of the pandemic, that might result in lower demand for oil.
Nevertheless, upside factors for crude prices are seen to be stronger this week. The Federal Reserve (Fed) and other central banks are set to actively counter the economic consequences of the pandemic. Crude prices were nudged by the Fed’s statements that it will buy corporate bonds of the companies that were not a part of the Quantitative Easing (QE) programme. It will certainly result in additional liquidity for these companies and for the entire U.S. economy, and it will most likely support domestic demand and private companies. This might be considered as a possibility of economic growth and higher crude demand.
Brent crude price, that slid to $37.1 per barrel, rebounded above $40.
Additional optimism was provided by the International Energy Agency (IEA) that renewed its crude market forecasts. The Agency now expects a lower decline in global demand in 2020 than it had previously projected. According to the fresh EIA projections demand could decline by 8.1 million bpd of the 2019 level, and that is by 500,000 bpd above previous estimates by the Agency. The global demand for crude in 2019 was 99.8 million bpd.
The market is waiting for the OPEC report on actual production and projections of cartel’s crude output for 2020 that is expected to be released on Wednesday. EIA is expected to publish its weekly crude reserves report in the U.S. later on Wednesday. This may well affect crude prices as the United States is the global leader in crude consumption and a largest oil exporter too. The previous report on crude reserves, which recorded a significant rise in reserves, was one of the reasons crude prices declined last week. This week minor changes in reserves are expected. If the actual data sharply differs from the forecasted figures, prices may move in either direction.
Crude prices dynamics at the beginning of this week may prompt the range for the week. This range is seen quite wide – between $37.8-41.7 per barrel for Brent crude benchmark.
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