Commodity Market: Crude Oil rebounds after overnight losses, but demand recovery concerns cap gains

Futures on US West Texas Intermediate Crude Oil recovered from overnight losses on Wednesday, but gains may be capped as concerns over fuel demand recovery persisted amid rising US crude and fuel inventories.

Both WTI and Brent futures surged yesterday after the International Energy Agency (IEA) revised up its full-year oil demand forecast to 91.7 million barrels per day. Additional support for both benchmarks came after the US Census Bureau reported a record monthly increase in retail sales in May, which heightened investor risk appetite due to optimism over a swift recovery in consumption, one of the pillars of the US economy.

Later in the day Oil erased gains as data from the American Petroleum Institute (API) showed crude oil inventories had surged by 3.9 million barrels to 543.2 million barrels during the week ended June 12th. Actual data raised concerns over a surplus, since analysts had expected a drop by 152,000 barrels.

Additionally, concerns over a second COVID-19 wave in China, the largest oil importer globally, may continue to weigh on oil prices and hurt recovery observed over the past two months.

“China’s shuttering of Beijing’s schools is a significant setback to the country’s recovery from the Covid-19 virus, and it could be a real blow to the petroleum demand recovery outlook, which had been improving,” John Kilduff, a partner at Again Capital LLC, pointed out.

As of 9:21 GMT on Wednesday, WTI Crude Oil Futures were gaining 0.49% to trade at $38.06 per barrel, after earlier rising as high as $38.73, or a price level not far from Tuesday’s one-week high. WTI futures have risen 5.70% so far this week, following a 6.57% slump in the preceding week, their worst performance since mid-April.

Brent Oil Futures were up 0.05% on the day to trade at $40.72 per barrel, after earlier rising to $41.44, or a level not far from Tuesday’s one-week high. Brent futures have gained 4.57% so far this week, following a 6.98% slump in the prior week.

In other news, oil giant Saudi Aramco announced earlier Wednesday that it had finalized the acquisition of a 70% stake in petrochemicals company Saudi Basic Industries from the PIF sovereign fund. At the same time, the payment period for the $69.1 billion deal has been extended to 2028.

At 14:30 GMT today the US Energy Information Administration (EIA) is expected to publish its weekly Petroleum Status Report, with market expectations pointing to a 1.6-million-barrel increase in crude oil stocks during the week ended June 12th. Stocks increased by 5.72 million barrels in the prior week.

Daily Pivot Levels (traditional method of calculation) – Crude Oil

Central Pivot – $37.78
R1 – $39.14
R2 – $40.41
R3 – $41.77
R4 – $43.14

S1 – $36.51
S2 – $35.15
S3 – $33.88
S4 – $32.62

Daily Pivot Levels (traditional method of calculation) – Brent Oil

Central Pivot – $40.41
R1 – $41.93
R2 – $43.17
R3 – $44.69
R4 – $46.22

S1 – $39.17
S2 – $37.65
S3 – $36.41
S4 – $35.18