Crude oil prices dropped on Friday, in London’s trading session as oil traders’ uncertainty strengthened on global recovery in energy demand as new COVID-19 cases rise in major global economies coupled with major producers getting set to ease oil production curbs from the month of August.
“Although oil prices have stalled, the buffet is gentle and not a prelude to an incipient spin lower,” said Jeffrey Halley, market analyst at OANDA, adding that both contracts are ranging at the upper end of their recent price levels.
Heightening concerns about the rampaging COVID-19 virus on the world’s economic productivity and an improved rebound in America’s oil production limits the bullish momentum among oil traders.
In the short term at the global energy market, some oil traders are still on the sidelines, waiting for clearer signals, especially on the macros surrounding the COVID-19 pandemic but oil traders remain optimistic in the mid and long term as demand recovers relatively.
The rampaging COVID-19 virus on America’s economic hubs is causing slower rebalancing in specific oil product segments, notably aviation fuel, meaning the second stage of the energy market rebalancing will take time.
Brent crude market has been on a tight trading range for several days, despite many strong fundamental factors that have historically influenced energy markets, meaning Brent crude could continue to pull back from the $45 strong resistance level.
While the near-term pricing on volatility on crude oil remains, the overwhelming proof in the energy markets suggests crude oil is past the record price plunge that occurred in late March, coupled with the sentiments that supply and demand are rebalancing.