Persistent glut worries dog oil price anew as it drops to 2% today

Persistent glut worries dog oil price anew as it drops to 2% today

The oil price of crude in the market went down today after cautious wins earlier this week.

CNBC reports that despite gains made earlier this week due to easing coronavirus restrictions and a lowering surplus, crude oil price exchanges ended Thursday’s trading day lower than yesterday. The market generally traded two percent lower on average at the close of the business day.

Reversal after slow steady gains

Both U.S. benchmark West Texas Intermediate and international benchmark Brent crude have been rallying ever since adjustments to the market were made last week. WTI went up on average 19% week-on-week.

The rebound that happened earlier today saw WTI prices go down to $23.55— a down of $0.43 or 1.83%. Meanwhile, Brent—which had breached the $30-per-barrel threshold—reversed its gains marginally, settling at US$29.46[AU$45.19].

Despite these losses, though, the trend shows that the general oil price is indeed rallying. WTI has shown a 115% increase in price from last month, while Brent has increased by 36%.

Oil is experiencing a slow, uneven rally

Fox Business says that the worst might be over. Oil prices may remain volatile, but the worst rebounds might be in the rearview mirror.

Multiple indicators show that the global supply surplus is improving.

Oil price fluctuation is the “new normal" for now

 

Global weekly production of oil went down by 11.9 million barrels per day in the week that ended on May 1. The U.S. market is slowly but steadily reducing its supply output.

Meanwhile, China made a huge dent on global supplies by purchasing around 11.9 million bpd last April. This helped in easing some of the oversupply worries and may have affected the global oil price.

Saudi Arabia also increased its official selling prices, which helped ease the pressure on oil, making a profit despite reduced sales.

As global economies slowly ease coronavirus restrictions, gasoline consumption is starting to go up, which might be the start of the market’s rally.

Short-term worries remain while end-year prices look rosy

The Wall Street Journal, however, cautions that while things are looking up, oil price woes might not be completely over yet.

The biggest issue is that while there are signs that oil supply may be on its way to normalization, it’s not definitive. There still isn’t enough data to paint a clearer picture.

In the CNBC report, Citi analyst Francesco Martoccia says that “The supply picture remains uncertain in size and timing, leaving a true read of U.S. balances murkier in the short term.”

Meanwhile, more traders are still selling off their short term futures, focusing more on long-term futures. With June futures trading closing in a few weeks, there remains little time for the prices to rally if more traders are selling low.

Moreover, the world is waiting on the U.S. jobs report for April this Friday. If unemployment is at a record high, analysts are worried that that may translate to weaker demand for oil and gasoline and can dampen the current oil price rally.

Images courtesy of Pexels/Pixabay

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