On Wednesday, both US and Brent crude futures’ prices had pared some of their losses after Tuesday’s bloodbath, though a resurgence in pandemic cases in some of the major oil consumers across the globe had offset hopes of a steady recovery of oil prices in a near-term outlook.
In point of fact, benchmark Brent crude had fallen below $40 per barrel for the first time since June on previous session following release of media reports that the OPEC-kingpin Saudi’s state-backed oil giant Aramco had slashed its official prices of Arab light crude for Asian countries, marking up a simmering sign of softening demands, while the US West Texas Intermediate crude had taken a header of roughly 8 per cent.
Nonetheless, despite a raft of downbeat data suggesting a likely demand crunch, Wednesday’s surprise gain of the oil futures appears to be stemmed off an opportunistic buying window following a heavy tottering on Tuesday’s commodity market, while a record supply cut adopted by the OPEC members and their allies seemed to be supporting a key handle around $40 per barrel.
However, the short-term fundamentals remained soft as a gauge of major global economies such as India, UK, Spain and the US had been witnessing a resurgence of the pandemic outbreak, eventually leading to a drawdown in demand optimism, while fanning the flames further, the US EIA (Energy Information Administration) had trimmed its global oil demand forecast for 2020 by 210,000 barrels per day to a reading of 8.32 million barrels per day on Wednesday.
Oil gains but sustained recovery at risk amid fragile demand outlook
Citing statistics, on Wednesday’s commodity market wind down, UK crude added 2.5 per cent to settle down the day at $40.79 per barrel having been dropped over 5 per cent a session earlier, while the US West Texas Intermediate crude oil futures’ prices rose by 3.5 per cent to wind down the day at $38.05 a barrel.
Meanwhile, referring to a growing grudge among the market participants amid little signs of recovery from the pandemic-induced fiscal slump, a Rystad Energy’s senior market analyst, Paola Rodriguez-Masiu said, “When strong Middle Eastern producers are willing to sell-off in lower prices, it is normal that the global market panics and follows suit. ”