September Crude Oil futures have been trading mostly lower since the U.K. voted to leave the Euro Zone, a move that could lead to a recession in Britain and Europe and a drop in demand. However, this week it looks as if the market finally reacted to the bearish supply/demand situation also.
The day before the Brexit referendum, the market closed at $50.11. Two days later it reached a low of $45.83. A subsequent short-covering rally sent the futures contract to $50.11 on June 29 and since then it has been downhill all the way with the September contract reaching a low at $44.87 this week.
The futures contract fell nearly 5 percent on July 7, reversing early intraday gains after the U.S. government reported a weekly crude oil draw that was a bearish surprise to bullish traders expecting a larger drawdown.
According to the Energy Information Administration, U.S. commercial crude stockpiles fell by 2.2 million barrels to a total of 524.4 million in the week through July 1. Traders were looking for a drawdown of 2.3 million barrels, far less than the 6.7 million-barrel draw reported by trade group the American Petroleum Institute for the same period on July 6.
Crude oil futures traders also reacted negatively to the EIA’s gasoline inventory drawdown that was just about a third of market expectations.
Helping to put a cap on crude oil recently has been the lack of demand for gasoline with many traders fearing a glut of the motor fuel, despite…