FX.co ★ Oil went downward correction after losing further support

The price of crude oil went on a negative correction on Monday. This is due to the inability of the US government to finalized an agreement on the fiscal stimulus program which causes grave tension among investors. In addition to this is the growing conflict between the US and China especially after the postponement of the bilateral meeting on the trade agreement.

Moreover, the US Department of Commerce announced that new restrictive measures were introduced for companies in the PRC telecommunications sector in the country in the form of closing access to some key elements. This brought even more fears amongst investors and thus, the largest Chinese corporation Huawei Technologies Co. fell under the sanctions.

On the other hand, the recovery in stock exchanges demonstrates greater optimism about the arrival of the global economy after the crisis associated with the coronavirus pandemic, bouncing back at a faster pace than previously thought. Of course, everything will not recover instantly, but the process will proceed at an accelerated pace.

On Wednesday, the OPEC ministerial monitoring committee is expected to make a decision during its meeting. Market participants look forward to the result of the said meeting which may affect the dynamics of the oil market.

The main problem that will be raised at the OPEC meeting is related to the execution of the deal under the agreement to cut oil production. During the second month of summer, countries that are members of the organization again fulfilled their conditions not completely, but by 95%. And the level of contract fulfillment in states that are not members of OPEC is slightly higher at 96%.

All this only means that the deal was not completed and, most likely, OPEC will decide on sanctions against those countries that could not meet the contract. According to preliminary estimates, the OPEC countries produce 300 thousand barrels per day, which is more oil than they should have. Also, the surplus of production of the non-OPEC countries to about 140 thousand barrels per day. Note that new obligations have already been introduced for those who did not comply with the terms of the contract. Such states were supposed to compensate for the entire shortage that developed over the period from May to July over the next two months, that is, in August and September. However, in August, not everyone began to execute the contract, and in September there are fears not to do this either,

The price of Brent crude oil futures contracts for October delivery on the London trading floor began to slightly decline by 0.22% or $ 0.1 Tuesday morning. This pushed the price to $ 45.27 per barrel. Recall that Monday trading closed in the green zone with a growth of 1.3% or $ 0.57.

The price of futures contracts for WTI light crude oil for September delivery on the electronic trading floor in New York also went down by 0.35% or $ 0.15, and the price moved to the area of $ 42.74 per barrel. Monday's trading ended with a good increase of 2.1% or $ 0.88.