Oil Price Drop: US oil inventories up & correlation confirmed - once again

 

US Oil Inventories

Among many factors that I follow closely when it comes to oil price, the US crude oil inventories always come at the top.

Most of the analysts, if not all, may not take it that seriously, especially when it is drowned out by the factors that create more soundbites and optics.

In a turbulent time what we are in now, the US the crude oil stocks has been rising during for the last three weeks, despite the US being nowhere near a full-blown lockdown that we see in Europe.

It may be due to anticipated lockdown and rising coronavirus cases, coupled with the US presidential election outcome that may force the White House change the course.

Oil price has dropped during the period of last two weeks and the likelihood of hitting below zero as it happened during the first lockdown remain next to impossible.

On a positive front, unlike during the first lockdown, people are prepared to get on with their lives as much as they can rather than fretting and fuming over the inconveniences – and risks, of course.

In addition, the new strain of virus appears to be less lethal than what spread the disease last time around.

In the other corner of the world, meanwhile, there are countries that managed the impact very well. The encouraging data shows that Australia, New Zealand, Taiwan, African continent, japan, South Korea and even China managed the situation well and came out relatively unscathed.

In these regions, manufacturing has picked up and so did the transport. It means demand for oil will grow and price will go up in proportion to it.

Both India and China will also show strong signs of recovery in the coming weeks; the rate of infection is slowing down in both countries despite the appearance of random clusters.

In this context, oil price will bounce back at some point in the near future, exactly as it did after the First Wave, even if we land in an era of the New Normal.

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