Both international benchmarks ended last week lower as Brent crude dropped to $41.92 per barrel and WTI crude prices fell to $40.25 per barrel.
What should have been positives for the oil price in the form of lower US stockpiles and hurricane outages in the US Gulf of Mexico, were overshadowed by demand fears coming from a second wave of the COVID-19 coronavirus which threatens to shut down major economies once again.
The market also eyed other potential negatives for the oil price on the supply side from Iraq and Libya.
A glut of oil stored onshore and offshore remains a concern for traders but nevertheless crude managed to remain above the $40 barrier despite the cautious mood.
Statements from some of the world’s biggest oil traders suggest they may be betting on price declines even as oil continues to trade in a narrow range. At the same time, after an extremely profitable second quarter, they may now be looking to reduce their activity and preserve their year-end bonuses.
Speculators continue to argue that the global oil market will not be able to absorb the planned OPEC+ output increase at a time of weakening demand and as stockpiles continue to build. They anticipate a large amount of oil going into ships as floating storage as onshore tanks gradually fill up.
Amid such pessimism, one must question their motive and whether the aim is to further depress prices by downplaying the efforts of OPEC+ to balance the market?
Maybe, as the Saudi oil minister suggested last week, they may already be hurting “like hell.”
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