Oil Stays Range-Bound Between $40 And $41

Oil Video 17.07.20.

Royal Dutch Shell CEO Believes That Oil Demand Will Stay Under Pressure For Years

Now that the acute phase of the crisis has passed, oil majors start thinking about their strategy for the future. A number of majors, including Royal Dutch Shell, have lowered their long-term oil price estimates and decided to cut capex.

Shell CEO Ben van Beurden thinks that the oil market will not experience a V-shaped recovery as demand for mobility will be lower even after the pandemic.

Shell believes that the pandemic has led to a lasting change in lifestyle which will put pressure on future oil demand.

In my opinion, it is too early to talk about long-lasting changes. The negative impact from increased work-from-home in developed countries could be easily offset by rising demand from developing nations when they finally manage to contain the pandemic.

However, such views from top CEOs clearly impact the market mood. WTI oil has been trying to get above the nearest resistance at $41.50 for many days and traders may get nervous if there is no upside breakout in the upcoming trading sessions since the recent inventory data was bullish.

Russia Plans To Direct Additional Oil Production To The Local Market

Yesterday, we discussed the words of Saudi energy minister who stated that the increase of oil production by 2 million barrels per day (bpd) will have little impact on the market since most of this oil would be consumed internally.

These words have recently been confirmed by Russian deputy energy minister Pavel Sorokin who stated that the ministry recommended to direct additional oil production to the local market in order to create reserves.

Russia plans to increase refinery output in August and boost the production of gasoline.

Such plans are bullish for oil since oil prices are sensitive to levels of exports from leading oil producers. If exports stay mostly unchanged, the increase of production will not have a negative impact on the market.

Still, it looks like oil will need additional catalysts to continue the current upside trend. The continued surge in the number of new coronavirus cases and partial lockdowns in various parts of the world pose a material downside risk for oil.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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