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WTI defends $ 80.00 level despite growing concerns

  • WTI rebounded from a previous drop below $ 80.00 and is now trading sideways approaching $ 81.00.
  • Some commodity strategists argued that speculation about the United States turning to the SPR was overblown.

The previous month’s futures for the US benchmark for light sweet crude oil, West Texas Intermediary or WTI, They ignored initial selling pressure that threatened to send prices below $ 80.00 and return to monthly lows at $ 78.28 to trade sideways near $ 81.00. However, a cloud of concerns is building for the crude oil markets.

Analysts are concerned about a possible impact on crude oil demand in Europe next winter as Covid-19 infection rates rise and countries tighten health-related restrictions. Meanwhile, there was more verbal pressure from the White House on OPEC + over its slow production hikes and the comment from Democratic lawmakers in favor of freeing up US crude oil reserves. Other touted concerns include the strengthening of the US dollar and global inflationary pressures that could fuel the tightening of the central bank, stifling economic growth (and the outlook for crude oil demand).

Traders also pointed to comments from the UAE Oil Minister on how global oil supply is likely to return to a surplus in the first quarter of 2022 as US shale comes back online. London-based energy research house Rystad Energy said Monday that US shale is likely to return to its pre-pandemic production levels of 8.68 million barrels per day in December.

Some commodity strategists argued that speculation about a U.S. move to tap into the Strategic Petroleum Reserve (SPR) had gone too far, explaining how crude prices were able to rebound later in the session. But WTI is showing little sign of beginning to record a recovery from last week’s highs near $ 85.00.

Speaking to Reuters, Louise Dixon, a senior markets analyst at Rystad Energy, said that “the market now appears to be less concerned about the current supply shortage, expecting it to be short-lived.” “Instead, traders are focusing on the return of two bearish factors: the possibility of more sources of oil supply and more cases of COVID-19,” he added.

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