FX.co ★ Crude oil risks losing all its positions

This morning, the price of crude oil has declined. The main reason for what is happening can be considered too high tension among market participants, which is due to fears that the supply in the market is becoming more and more, and demand is weakening.

Investors' concern did not suddenly appear. Yesterday, the United States Department of Energy released another batch of statistics on the quantitative reserves of black gold in the country. As it became known from the report, there was an increase in the total number of reserves to a record level, namely: stocks of raw materials in the United States increased by 5.72 million barrels last week. This was not expected by analysts, who indicated in their preliminary forecasts that there would be a decline of at least 3.2 million barrels.

The American gasoline reserves also suffered an increase which grew by 866 thousand barrels in the week that came to an end on June 5. At the same time, distillates grew by 1.568 million barrels.

As a result of this growth in the United States, market participants have become seriously worried that this increase will not be the last. There is now a great temptation for countries to increase their production, since the market for crude oil has started to stabilize, oil prices are rising, and everyone wants to earn money in the post-crisis period. It is quite possible that production will begin to grow rapidly in the near future, which will provoke a new wave of negativity in the market.

Moreover, all previous efforts may be unsuccessful amid increased production in America, which will seriously bring down the price of black gold again. At the very least, the total number of idle mining installations is too large, and they will have to return to their work someday. Now is a good time to do this.

Adding to the pressure on the oil market are forecasts coming from the US Federal Reserve. According to the regulator, the country's economy will not be able to demonstrate a rapid recovery. In order to support this process, the Federal Reserve intends to continue its soft policy, according to which the base interest rate will remain at an extremely low level from 0 to 0.25%. At the same time, the implementation period of this policy is set for several years ahead, until the end of 2022.

The decision of the Federal Reserve on interest rates cannot be considered random: it is dictated by a not-so-positive forecast for economic growth in the country. Thus, a huge reduction in GDP is expected in the second quarter of this year, which has not yet been recorded.

On the other hand, the price of Brent crude oil futures for delivery in August on a trading floor in London declined by 2.92%, or 1.22 dollars this morning, which sent it to the level of 40.51 dollars per barrel. It can be recalled that yesterday's session ended for this brand with an increase of 1.3%, or $ 0.55.

The price of WTI crude oil futures for July delivery on the New York E-Exchange also declined by 2.43%, or $ 1.37: its current level is now in the range of $ 38.23 per barrel. Trading on Wednesday ended with a rise of 1.7%, or 0.66 dollars.

However, the Fed's situation is not the only thing that stresses market participants: many began to talk about the serious second wave of the coronavirus pandemic. Statistics reflected a new increase in the number of cases in the United States. As it became known, the number of infected persons exceeded the level of 2 million people yesterday, which was not there for a long time. Over the past five weeks, there was a steady decline in the number of cases. So time will tell whether this will be a new wave, but market participants are already tense from this turn of events.