West Texas Intermediate and Benchmark Crude Oil futures in the US settled lower on Friday in lackluster trading. Despite Thursday’s technical closing price reversal, there was no upward follow-up, suggesting that yesterday’s move was likely driven by position squaring rather than new purchases.
On Friday, August WTI crude settled at $ 38.49, down $ 0.23 or -0.59%, and September Brent crude ended at $ 40.93, down $ 0.19 or -0.46%.
After reaching their highest levels since March 6 earlier in the week, both WTI and Brent crude oil succumbed to pressure from renewed concerns of COVID-19 and the possibility of another round of demand destruction, the increased US stocks and the possibility of increased production, and boiling US-China relations that could derail the Phase One trade deal.
COVID-19 Concerns and fear of a second wave of destruction of demand
The rapid rise in coronavirus cases in the US, South America, and South Asia weighed on prices during the week as it brought back memories of the destruction of demand that brought futures prices close to zero in May. The fear is that even if blockages are alleviated, people will stay home due to perceived health risks, putting pressure on the demand for gasoline and distillates.
US inventories are at record levels and could rise further
The U.S. Energy Information Administration (EIA) reported Wednesday a 1.4 million barrel rise in crude oil inventories for the week to June 19, and fuel inventories posted mixed results. Traders were looking for a 1.2 million barrel construction.
The EIA also reported an extraction of 1.7 million barrels of gasoline for the weekend of June 19, compared to a decrease of the same size the previous week. For distilled fuels, where demand has recovered more slowly than for gasoline, the EIA reported an inventory increase of 249,000 barrels during the week to June 19, compared to a consumption of 1.4 million barrels reported the previous week. .
Refinery executions averaged 13.8 million bpd, compared to 13.6 million bpd the previous week. Gasoline production last week averaged 8.8 million barrels per day, compared to 8.4 million barrels per day the previous week. Distillate production averaged 4.6 million bpd last week, compared to 4.5 million bpd the week before.
In addition, a survey by the Federal Reserve Bank of Dallas of executives from the main US oil and gas producing region found that more than half of the executives who cut production expect to resume part of the production at end of July.
China warns that US ‘meddling’ in Hong Kong could derail Phase One trade deal
A Chinese official recently expressed “strong dissatisfaction” with the US sanctions that came in response to a new national security bill in Hong Kong, warning to cross the “red lines” and meddle in what China considers its own internal affairs could jeopardize the trade agreement, The Wall Street Journal first reported on Friday.
China’s comments responded to a move by US lawmakers the day before. On Thursday, in response to China’s comprehensive Hong Kong national security bill, the United States Senate unanimously passed a new bill that imposes sanctions on Chinese officials and companies that undermine Hong Kong’s autonomy. off Beijing.
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