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Home Sectors Energy

Oil prices hit the biggest daily decline on COVID-19 resurgence, inventories

Chike Olisah by Chike Olisah
June 12, 2020
in Energy
CRUDE OIL, U.S Shale, Naira under pressure, as crude oil hits $25 per barrel, Oil Price: A dead cat bounce in the making?, Bears tear Crude oil futures into shreds as Brent slumps more than 20%
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This year has been a turbulent one for the oil market as crude oil prices went negative for the first time in history. This was closely followed by one of the most dramatic rallies the industry has ever seen as the oil market stabilizes.

However, a resurgence of COVID-19 cases in the United States which is compounded by another record build up in US oil inventories and a gloomy economic forecast from the Federal Reserve Chairman, Jerome Powell has seen the oil prices hit their biggest daily decline since April 27. The lack of demand and supply glut has once again taken centre stage.

The Brent crude lost over 8% to sell at about $38 per barrel and the American WTI lost declined by about 9% to sell at about $36 per barrel.

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According to Energy Information Administration (EIA), the US oil inventories unexpectedly rose by 5.7 million barrels of crude oil to 538.1 million barrels, which is contrary to the earlier predictions of 1.45 million barrel build-up. This is due to the arrival of supplies that were bought by refiners when Saudi Arabia flooded the market in March and April.

Read Also: Why are oil prices down despite a successful OPEC meeting?

The high inventory, together with the recent announcement of an unemployment rate of almost 9.3% by the end of 2020 by the US federal reserve, has put more pressure on the oil market. It is predicted that it could take years to get back to pre-pandemic employment levels. The US federal reserve had also projected that the world’s biggest economy will shrink by 6.5% this year.

The resurgence of the coronavirus pandemic has been the main cause of the oil market collapse. It took almost 3 months to hit I million confirmed cases, whereas it took only 6 weeks to hit 2 million mark with many states reporting significant spikes.

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Analysts have said that the prices have come under pressure again over concerns about the slow pace of the demand recovery.


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Tags: Brent oilBusiness NewsCoronavirusEIAJerome Powelloil marketoil prices
Chike Olisah

Chike Olisah

Chike was a banker with over 11 years experience in retail and commercial banking, risk management, treasury portfolio management and relationship management. He also acquired some experience in financial management and do have some special interest in investment analysis and personal finance. He had stints with financial institutions like the former Intercontinental Bank and Fidelity Bank.

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