Oil Declines Again over Demand Worries
Oil futures fell again in energy commodities on Wednesday after a sharp slide in the previous session. A rebound in COVID-19 cases in some countries undermined hopes for a steady recovery in global demand.
Brent crude (LCOc1) was down 19 cents, or 0.5%, at $39.59 a barrel by 0656 GMT. It dropped more than 5% on Tuesday to fall below $40 a barrel for the first time since June.
U.S. crude (CLc1) was down 24 cents, or 0.7%, at $36.52 a barrel. It had fallen nearly 8% in the previous session.
Both of these major oil benchmarks are trading in commodities at around three-month lows.
The global health crisis continues to flare unabated. COVID-19 cases are rising in India, Great Britain, Spain and several parts of the United States.
Morgan Stanley (NYSE:MS) said, short-term oil market fundamentals look soft. The demand recovery is fragile, inventories and spare capacity are high, and refining margins are low.
Yet, the bank raised its Brent price forecast slightly higher to $50 a barrel. This is for the second half of 2021 with the dollar weakening and rising inflation expectations, it said.
Record supply cuts by the Organization of the Petroleum Exporting Countries and allies, (OPEC+) have helped support prices. But the outlook for demand for oil remains bleak, with grim economic figures being reported almost daily.
China’s factory gate prices fell for a seventh straight month in August although at the slowest annual pace since March. This suggests industries in the world’s second-biggest economy continued their recovery from the coronavirus-induced downturn.
As Oil Prices Slide, Gold Recovers
Meanwhile, in commodity news, gold prices fell with US equities initially, trading as low at USD1906.00 an ounce. Buyers of gold were on the dip with prices rallying to finish almost unchanged at USD1931.50 an ounce.
The decoupling of gold from the equity market sell-off will bring cheer to bullish investors. This precious metal has once again held its daily support zone between USD1900.00 and USD1920.00 an ounce.
A continued equity sell-off in New York could see gold move lower once again to retest USD1900.00 an ounce.
A deeper correction to the August low around USD1860.00 cannot be ruled out completely. Channel resistance at USD1977.00 looks quite far away at this stage as well. That is with gold unable to sustain rallies to USD1950.00 in recent times.
