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SunSirs: U.S. Stock Market Fell sharply, Oil Price Dropped about 2%

July 27 2020 09:57:50     SunSirs (Selena)

On July 23, the U.S. WTI crude oil futures market price fell, with the settlement price of the main contract at $41.07/ barrel, down $0.83. The price of Brent crude oil futures market fell, with the settlement price of main contracts falling by $0.99, to $43.31/ barrel, while oil price fell by about $1. The market was worried about whether the US economic stimulus package could be reached. In addition, the number of jobless claims increased at the beginning of last week, the number of superimposed epidemic cases increased sharply, and concerns about future fuel demand increased.

The U.S. stock market fell sharply on Thursday, with the S & P 500 index falling by more than 1%, stopping from the previous four days of continuous gains and the largest one-day decline since June 26. The increase in the number of people applying for unemployment benefits announced by the U.S. Department of labor at the beginning of last week was the fuse for the decline of the stock market, and the fundamental reason was that the increasingly serious epidemic situation had brought a heavy blow to the economy. At the macro level, the bad news spread to the oil market, and the oil price fell by about 2%.

Prior to that, on last Tuesday and Wednesday, the increase of crude oil inventory in the week of July 17 announced by API and EIA of the United States both exceeded expectations. The negative atmosphere has gradually enveloped the national oil market, but the price fluctuation is not big, which is mainly covered by the good news of the basic landing of EU recovery fund and breakthrough in vaccine. However, the market is generally worried about whether the US economic stimulus plan can be reached in Congress. This has cast a shadow on the current complex oil market. Oil prices also closed lower amid uncertainty.

At present, the factors restricting crude oil to continue to rise are still demand concerns. According to the data of the US Energy Information Agency (EIA), the average crude oil processing capacity of US refineries last week was 14.2 million barrels/ day, which was lower than 14.4 million barrels/ day two weeks ago. Due to the decline in fuel demand, US refiners have cut crude oil processing capacity for the second consecutive week. Since the beginning of May, fuel demand has continued to grow strongly. At present, the signs of slowing down indicate that the market has changed. The U.S. epidemic is becoming more and more serious, with a surge of new cases in some states, the restart of social isolation measures, and the reduction of road traffic volume, resulting in weak gasoline consumption. In addition, aviation kerosene demand also decreased significantly. According to relevant data, last week, distillate oil supply was 20% lower than the average level of the previous five years, and aviation fuel supply was 38% lower than the five-year average level.

On the whole, SunSirs believes that under the background of the rising COVID-19 epidemic situation, it may be difficult for the oil market to get out of the independent upward market. There are too many uncertain factors in the market. At present, under the premise of strict production reduction and supply reduction in oil producing countries, the international oil market is basically in the stage of supply and demand rebalancing. At present, the oil price is also stuck at the $40 level. It is expected that the balance will not be broken in the near future, and the oil price will continue to fluctuate in a narrow range in the short term.

 

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