The price of crude oil dropped Thursday morning, which is caused by doubts that demand will be able to recover to a more or less adequate level. The release of the minutes of the US Federal Reserve System created a nervous atmosphere for market participants. According to the content of the minutes, the state still retains an extremely high degree of uncertainty about the development of the economy and its recovery from the crisis associated with the coronavirus pandemic. In addition, the increase in the incidence continues to this day, and so far there is not even a hint of a significant reduction.
The price of Brent crude oil futures contracts for October delivery on the London trading floor fell 0.84% or $ 0.38. Its current level was at $ 44.99 per barrel. Note that Wednesday's trading closed with a drop of 0.2% or $ 0.09.
The price of futures contracts for WTI light crude oil for September delivery in electronic trading in New York also went down on Thursday falling 1.02% or $ 0.44, which moved the price to $ 42.49 per barrel. Bidding on Wednesday ended on a positive note, although the increase was only 0.1% or $ 0.04.
The price of WTI crude oil futures contracts for October delivery also dropped 0.93% or $ 0.40. This sent futures to the region of $ 42.71 per barrel. Wednesday's trading session for these contracts was also not very successful: according to its results, it decreased $ 0.01.
The said Fed minutes on the Open market operations meeting also stated that the US economy is not able to quickly cope with the resulting crisis, which will have to resort to additional support measures. The problem is that the country's authorities are still unable to determine the specific actions and tools that can be applied in order to create a more favorable environment for economic growth.
It is becoming obvious that these measures and further actions will completely depend on the growth of coronavirus infection, as well as on the ways in which government agencies will try to suppress it. If the pandemic is contained in a shorter time frame, the recovery will also go faster, otherwise, the crisis will become deeper and the recovery from it will be more difficult and longer.
Despite this, there is still some positive on the crude oil market. Yesterday, the press received a report from the US Department of Energy, stating that oil reserves in the country for the previous week decreased by 1.632 million barrels. Thus, there was a fourth consecutive decline. However, analysts in their forecasts argued that there would be a more substantial drop in the level of reserves by at least 3.8 million barrels.
The level of black gold reserves at the strategically important storage facility in Cushing also decreased by 607,000 barrels. At the same time, demand has also dropped sharply over the past four weeks: the fall in the indicator was 14% on an annualized basis. The possible reason for this is the new restrictive measures re-introduced in certain states of the country against the backdrop of a sharp jump in the number of COVID-19 cases. The authorities are trying by all available means to contain the next wave of the virus.
US fuel reserves also decreased by 3.322 million barrels, but there are more distillates by 152 thousand barrels. Experts had hoped that the decrease in gasoline reserves would not be so significant and could not exceed 2 million barrels, and the level of distillates would decrease by 900,000 barrels, however, this also did not happen.
Another important event of the week is the meeting of the OPEC ministerial committee. In the course of it, the countries that have not fully paid off their obligations to reduce oil production for the period of May to July confirmed their readiness to achieve full compliance with the conditions set by the end of September this year.
In addition, members of the organization noted clear progress in the oil market. They particularly pointed out that the accumulation of commercial stocks changed the vector, the gap between supply and demand decreased. These are certainly good signals, but it is too early to rejoice, since there are still plenty of problems in the black gold market, and they will have to be solved in the very near future in order to support the growth of oil prices in the future. The pace of recovery, as it is becoming clear now, will not be as rapid as expected and desired by market participants and government authorities, since the wave of coronavirus infection again covers the world, and, possibly, it will be longer than the that of spring.
