U.S. West Texas Intermediate crude oil futures are in a position to finish sharply lower for the week after hitting a multi-month high just a few days ago. The selling pressure is being provided by speculators who continue to erase the risk premium in the market by dumping long positions placed as hedges against the escalation of the conflict between the United States and Iran.
The market is not bearish, per se, despite the aggressive selling pressure. It continues to be underpinned by the hope that the new trade deal between the United States and China would lead to global demand growth. Furthermore, traders are hoping the deeper production cuts buy OPEC and its allies would offset some of the increase in U.S. output.
Recap of Key Weekly Events
On Wednesday, the markets dropped nearly 5% after U.S. President Donald Trump’s comments on the Iran conflict eased investor worries about further escalation of geopolitical risks in the Middle East. Early in the session, prices had surged about 4% in response to an Iranian attack on an Iraqi airbase that houses American troops.
Weekly Inventories Report Divergence
Fundamentally, this week’s industry report was bullish, but the government report was bearish. This creates a divergence that will need to be addressed by traders in the near future.
Furthermore, if you look at the data in both reports, gasoline supply is growing. This is being blamed on a drop in demand. It could lead to a…