(MENAFN- DailyFX)
Crude oil price, news and analysis:
- The price of crude oil is generally sensitive to rising tensions in the Middle East and might have been expected to have strengthened on the current hostilities in the region.
- The fact that it hasn’t suggests further losses as traders concentrate on rising crude stockpiles and a possible drop in demand from China.
Advertisement US crude set to fall further
Crude oil prices generally rise when tensions increase in the Middle East and the fact that they haven’t suggests more losses to come even though the price of US crude (WTI) has dropped already from a recent high of $74 per barrel on July 30 to $68 currently.
The list of Middle East problems includes:
- A drone strike on the oil tanker MV Mercer Street off the coast of Oman, widely blamed on Iran,
- The apparent hijacking of an asphalt tanker in the Gulf of Oman, now over, also blamed on Iran,
- The launch of Israeli air strikes on Lebanon in response to rocket attacks, and
- A pause in the talks on reviving the 2015 nuclear deal between Iran and the West.
In addition, reports suggest that the Atlantic hurricane season is about to ramp up dramatically and US stockpiles of gasoline have dropped to their lowest since November last year. Yet there have been few signs yet of the decline in crude prices coming to an end.
Crude Oil Price Chart, Two-Hour Timeframe (July 16 – August 5, 2021)
Source: IG (You can click on it for a larger image)
At least two factors could be in play here:
- Covid-19 cases are rising again in China and that could hurt the Chinese economy and therefore the country’s demand for oil, and
- A surprise build in US stockpiles of crude oil, according to the US Energy Information Administration, of 3.6 million barrels in the week to July 30 to 439.2 million. That compares with predictions of a 3.1 million barrel drop.
So, if demand falls and inventories are high the likely result will be still lower prices, with the July 20 low at $64.80 a possible target for the bears.
--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
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