The oil price continues to fall. Yesterday there were reports of alleged attacks by the Houthis on oil facilities in Saudi Arabia. But this news could only send the oil price up about 50 cents for a few minutes at 2:00 p.m. yesterday. But then the news went down as insignificant and the market immediately turned down again. Why does it keep falling?
Two reasons for further falling oil prices
Yesterday at 4:30 pm German time the official government data on crude oil inventories in the USA were published. Contrary to expectations, there was an increase in inventories by 3.5 million barrels. This means too much oil supply, too little demand, or both at the same time. This, of course, is negative for the price of oil. It fell 40 cents immediately after the release, and also caused selling pressure in the following hours last night.
The sale continues this morning as well. The price of oil has fallen from yesterday noon at 54 Dollars to 52.40 Dollars. Thus WTI oil is currently scraping against its low of Monday at 52.13 Dollars. The reason for this is also that the situation around the corona virus is escalating further and further. Several airlines have stopped their flights to China for the first time, including Lufthansa. Less air traffic and general economic activity is depressing the demand for oil, which of course immediately puts pressure on the oil price on the futures market.
In a short time, the number of deaths in China has risen by 38 to 170. This is the largest increase since the outbreak of the virus in China was announced. The number of confirmed infections has increased by 1,700 to 7,711 cases (more details on the current situation here). On Tuesday we wrote that the crash in oil prices had stopped for the time being and that the further course of the oil price would mainly depend on whether the situation around the corona virus worsens. And yes, currently we can see that it is worsening. In combination with the increasing crude oil inventories, we are currently experiencing a further decline in the oil price.
Price of gold rises
The price of gold has risen by 12 Dollars since yesterday noon until now. So the Risk-Off trade seems to be picking up again (fleeing to the safe haven). The Dow 30 has fallen 360 points since 8pm German time yesterday evening, which is not only due to the corona virus. Currently, when the oil price falls below the low of 52.13 Dollars, the situation continues to look bearish for oil. This is of course no guarantee for falling prices! Please make up your own mind.