The price of crude oil ended July on a positive note, having recovered from some of its more recent losses. However, the month of August has so far failed to offer any interesting insights into oil to inspire investors. The prices of both the Brent crude and the WTI brand have entered flat channels around $45 and $42 per barrel, respectively.
At present, we can hardly speak of a real trend existing on the oil chart. This asset remains highly volatile because the market conditions are always changing. The biggest factor influencing oil at the moment is the coronavirus pandemic, which has inflicted a major blow to the demand for oil globally.
If there is more news about the pandemic coming to an end, oil prices will recover. For instance, their current level above $40 was only made possible by Asia and Europe overcoming the worst of the pandemic and showing signs of economic growth again. Because the lockdowns are over, industrial factories are working and people are traveling again, which is creating more demand for fuel.
The United States, which is the biggest consumer of oil in the world, and also the country that was affected the most by Covid-19, remains a point of concern. Nevertheless, this week it seems that the virus is slowing down in the United States, which is a positive sign for oil.
The other side of the coin is oil supply. Indeed, a recovery from the pandemic and the end of the lockdowns offer a boost to demand - but not an infinite one. Recall that the oil market was oversupplied years before the coronavirus pandemic occurred. With OPEC+ members gradually ramping up oil production, a quick increase in the supply of oil could outpace the rise in demand and pressure prices once again.
To this end, today’s EIA oil report will be crucial in determining the current supply levels and determine whether oil prices are to move up or down from here.
