Oil traders are going short momentarily on reports revealing U.S. crude oil stockpiles gained significantly, coupled with President Trump’s threat of not signing the long-awaited COVID-19 stimulus deal recently approved by U.S congress, pushed Brent crude prices below the $50/barrel.
At the time of drafting this report, the American-based oil contract, West Texas Intermediate dropped more than 1%, to trade at $46.56 while the London-based oil contract, Brent crude futures lost about 0.9%, to trade at $49.62 a barrel.
Oil bears are taking a grip on the oil market at the time both major oil contracts lost nearly 6% in value after their second straight session of declines, oil bears sunk their claws deeper at today’s trading session after recent data from the world’s largest economy revealed soft energy demand remains in play.
American Petroleum Institute recent data showed reported crude oil stockpiles gained by 2.7 million barrels in the week to December 18, compared to energy experts’ expectations for a drop of 3.2 million barrels.
Oil prices are tanking lower, after President Trump rattled oil traders’ nerves on not signing the $892 billion COVID-19 stimulus bill, saying he wanted U.S lawmakers to increase the amount on relief checks which U.S lawmakers approved some days ago.
Also, COVID-19 cases continued to rise at the world’s largest economy, with over a million new cases in less than a week, prompting government authorities in discouraging its citizens from traveling for Christmas, further dampened energy demand, as air travel and social mobility came under check.
In addition, restrictions on human mobility are also prevailing in most part of Western Europe prompting energy demand fear to resurface on the bias that reduced human activity signal a further distortion in energy demand/supply rebalancing, meaning Brent crude prices could settle below $48/barrel at the end of 2020 if the prevailing situation remains in play.
If the world largest economy goes back anywhere near the edge of the COVID-19 lockdown abyss that occurred in March/April, oil bulls could go under for at least two months not to mention a big price wipe-out in crude oil’s previous gains.
Unfortunately, for Oil bulls, the crude oil price pattern points to more downside in play especially as COVID-19 lockdown headlines take the center stage.