US oil prices are falling due to poor forecasts for fuel demand. The US Federal Reserve and OPEC + are cautious about the recovery in demand as many countries are still facing the coronavirus pandemic.
- Both WTI and Brent crude oil are cheaper
- The reason for this are poor forecasts for a revival in fuel demand
- The coronavirus pandemic and the uncertainty over the autumn events are to blame for everything
A barrel of American WTI (West Texas Intermediate) oil in deliveries for September, on the NYMEX fuel exchange in New York, is valued at $ 42.49, which is a decline of 1.02 percent. Meanwhile, European Brent crude oil for September deliveries on the ICE Futures Europe fuel exchange in London is trading at USD 45.02 per barrel, down 0.77 percent. Still, oil is the most expensive in five months.
Oil prices are falling due to the uncertainty surrounding the pandemic
The uncertainty surrounding the economic impact of the Covid-19 pandemic is extremely high – according to the minutes of the last Federal Reserve meeting. As stated in the July 29 release:
Fed members continue to observe that the uncertainty surrounding the economic impact of the pandemic is extremely high, and that the unusual nature of the shock of the pandemic makes assessments of how the economy may evolve in the future more difficult than usual.
The Fed also pointed out that uncertainty about the economic outlook remains very high, and that the path of economic development largely depends on the course of the coronavirus pandemic and the public sector’s response to it.
In turn, the OPEC + countries warned after Wednesday’s meeting that the pace of rebound in fuel demand is slower than expected and is further threatened by the prolonged coronavirus pandemic.
“Oil prices react to the bearish comments from the Fed, while the signals from OPEC + were largely in line with expectations, “says Howie Lee, economist at Oversea Chinese Banking Corp.” Oil is expected to remain at current levels as the market is still making its way in situation of a large surplus of oil, “he adds.
Meanwhile, U.S. oil and gasoline stocks are falling, according to a recent report by the Department of Energy (DoE):
- Crude oil inventories fell by 1.63 million barrels last week, or 0.32 percent. to 512.45 million barrels, the DoE announced on Wednesday;
- Gasoline inventories fell by 3.32 million barrels, or 1.34 percent. up to 243.76 million barrels.
At the end of the previous session, crude oil in the WTI on the NYMEX increased by 1 percent. and ended trading at the highest level in 5 months. Brent lost on ICE at the end of the previous session by 0.2 percent.
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