Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. Oil Falls Below $40 as Demand Worries Stump Big Draw

Published 30/07/2020, 20:28
Updated 30/07/2020, 20:28
© Reuters.

© Reuters.

By Barani Krishnan

Investing.com - The benchmarked price of U.S. oil settled beneath $40 a barrel on Thursday, snapping a support level critical to longs in the market, as traders brushed away a big crude draw reported by the government on Wednesday to focus on demand worries sparked by Covid-19.

New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled down $1.35, or 3.3%, at $39.92 per barrel. It was WTI’s first settlement below $40 since July 9 and marked its biggest slide since June 11. 

London-traded Brent, the bellwether for global crude prices, closed the New York session down 50 cents, or 1.1%, at $43.25.

Just on Wednesday, WTI rose 0.6% while Brent gained 1.2% after the Energy Information Administration reported that U.S. crude inventories declined 10.6 million barrels during the week ended July 24, confounding traders who were expecting a build of 357,000 barrels.

But all that bullish sentiment evaporated by Thursday as most commodities, including safe-haven gold, fell on data showing the U.S. economy shrank almost 33% in the second quarter — a plunge not seen since the Great Depression. 

U.S. weekly unemployment claims, also released Thursday, showed some 1.43 million Americans filing for first-time unemployment benefits last week. Continuing weekly claims show at least 17 million Americans remaining out of jobs since the coronavirus first forced tens of thousands of businesses in the country to shutter in March. 

Federal Reserve Chairman Jay Powell warned on Wednesday that the pace of economic recovery seen since the first business reopenings in May has slowed. He also said some jobs lost to the pandemic may never return, adding that those laid off by eateries and places of public entertainment such as restaurants and bars just did not have enough jobs to return to.

“The bears … think that demand is not going to come back as strongly as expected,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina.

“They are watching the margins and physical markets. They are watching the lack of Chinese crude buying. They look at the picture on the physical side and don’t see the stock draws that many of the banks and consultants see.  They talk about a resurgence of COVID in not only the US, but the rest of the world and think that there may be another large shutdown coming.  They think that supply is going to come back and demand won't.” 

On the Covid-19 front, the United States has recorded more than 4.4 million infections, according to Johns Hopkins University. The nation’s death toll from the pandemic, meanwhile, has crossed 150,000, accounting for more than one-fifth of global fatalities from the virus.

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.