Brent Oil edged towards $28 a barrel before pulling back to the $26-27 price levels at the Asian Session on Friday morning. This move consolidates oil’s first weekly gain in a month. The Oil bears were losing steam mid-week and gave room for the Oil Bulls to overcome them as market fundamentals favoured an upside in prices. Prices were headed for a decline at the beginning of the week, but positive data in demand, supply cuts from oil-producing nations, and a potential drug that could potentially treat Covid-19 favoured a U-turn in Oil Prices.
While concluding my last article, where are oil prices headed?, I wrote: “As for the Oil Bears, they still lean towards the elephant in the room, which remains the demand destruction caused by the Coronavirus and the availability of storage facilities for excess oil.” This eventually set up an oil-handicapped match at the beginning of the week, as The Bears pitched tent with the Elephant and trumped the Bulls in two days. Eating up almost half of all the gains, the Bulls made last week.
Brent Oil prices slid to $19 on Monday after it was reported that the United States Oil Fund LP claimed it would sell all of its holdings on W.T. I June contracts. The reason behind their decision was to avoid a similar scenario of negative prices as a result of buyers facing inadequate storage facilities when the futures contract expires. Stephen Innes, a global market strategist at AxiCorp, corroborated their concerns. He said that “The startling June selloff is in part due to the reality of storage facilities filling up rapidly.”
That triggered more selloffs coming into Tuesday as prices further dwindled on the backdrop of information concerning filled storage capacities. There were a lot of storage tankers and vessels carrying oil throughout the week, with no one eager to buy them, which raised concerns of a repeat of the collapse that sent oil below zero for the first time last week.
While concluding my last article, where are oil prices headed?, I wrote: “As for the Oil Bears, they still lean towards the elephant in the room, which remains the demand destruction caused by the Coronavirus and the availability of storage facilities for excess oil.” This eventually set up an oil-handicapped match at the beginning of the week, as The Bears pitched tent with the Elephant and trumped the Bulls in two days. Eating up almost half of all the gains, the Bulls made last week.
Brent Oil prices slid to $19 on Monday after it was reported that the United States Oil Fund LP claimed it would sell all of its holdings on W.T. I June contracts. The reason behind their decision was to avoid a similar scenario of negative prices as a result of buyers facing inadequate storage facilities when the futures contract expires. Stephen Innes, a global market strategist at AxiCorp, corroborated their concerns. He said that “The startling June selloff is in part due to the reality of storage facilities filling up rapidly.”
That triggered more selloffs coming into Tuesday as prices further dwindled on the backdrop of information concerning filled storage capacities. There were a lot of storage tankers and vessels carrying oil throughout the week, with no one eager to buy them, which raised concerns of a repeat of the collapse that sent oil below zero for the first time last week.