- WTI is on the verge of a potential downside continuation.
- The demand side case is folding and the markets are concerned about covid again.
The price of a barrel of oil at the start of the week had taken a considerable knock in the price of WTI, travelling between a high of $77.13 and reaching as low as $74.79 on the day. However, in recent trade, the price established a low and has made tracks to the upside. At the time of writing, the price of oil is now up some 1.45% trading at $76.75.
The price was falling to a seven-week low after Japan said it may release oil from its strategic reserves. Japanese prime minister Fumio Kishida on the weekend said he is ready to cooperate with US requests to release oil from strategic reserves to bring down gasoline prices. At the same time, investors are concerned over the renewed lockdown measures in Europe. Additionally, weaker economic data from China are heightening demand worries.
This is hurting the demand-side argument for higher prices. Then, there were the reports of a coordinated Strategic Petroleum Reserve (SPR) release from the White House in concert with several other countries.
''The Biden administration has asked a wide range of countries, including China, to consider releasing stocks of crude,'' Reuters noted. ''The White House has also repeatedly pressed the OPEC producer group - which plans to meet on Dec. 2 - to maintain adequate global supply.''
Covid contagion risk is back
Meanwhile, analysts at TD Securities are more concerned over the potential for more widespread lockdowns in Europe as a measure to encourage better vaccination rates remains a more potent risk.
''In fact, our analysis suggests that the virus' ability to impact mobility trends has deteriorated over time. In turn, we continue to see a path for energy supply risk to resume its upward trajectory, particularly as global energy markets remain extremely vulnerable to a demand shock this winter,'' the analysts said.
''The rise in European natural gas prices could also see expectations for demand from gas-to-oil-and-fuel-oil switching rise once again, particularly if winter is cold.''
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