Crude Oil Price Could Be at Risk From A Further Demand Drop
The crude oil price could be at risk from the threat of further lockdowns in European countries. The U.K. has moved to implement further restrictions in the country over fears about the spread of virus cases. Prime Minister Boris Johnson has also been advised to consider a “14-day” lockdown around the October half-term holidays and markets are maybe underestimating the potential for those lockdowns to run further.
European countries are also seeing rising cases and it could be bad news for oil, which was able to mount a four-month rally from the panic-selling in mid-March. This week will see oil inventories released and other data from the EIA today saw oil exports had fallen in the U.S. every month since the February record high. Exports were near 4 million barrels monthly in February but are now back under 3 million. A growing risk of lockdowns could create another glut in oil stocks.
Last week the International Energy Agency (IEA) cut its oil demand forecast for the second time in two months due to the slower global recovery. Global consumption of petroleum and liquids was said to average 92 million barrels per day in 2020, which was lower than the 100 million figure seen in 2019.
Crude oil now sees a continued threat from slowing demand through the potential for further virus lockdowns in the key developed economies. European countries are already cutting down on family gatherings, while P.M. Borish Johnson has encouraged a return to home working arrangments. Refineries cut output by around 30% during the March lockdowns which briefly saw a negative futures price in crude.
Crude Oil Technical Outlook
Crude has seen a daily close below the $40.00 level yesterday and this would be the key level in crude. The move was also a failure of the 50-day moving average and this could add further weight to the price. First support in crude comes in at $37.00 with the $35.00 level if it doesn’t hold. If the price can clear $40.00 then a bounce is possible. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.