Crude oil prices drifted lower at most part of Asia’s trading session on Tuesday.
Oil traders are reacting to the rising oil rig count data from the world’s largest economy. Recent data obtained from Baker Hughes printed the total rig count up by four to 183, which is the highest seen since last month.
At the time this report was written, both major crude oil benchmarks were down more than 0.9% but traded above $40/barrel.
A surge in the number of rigs is usually an early sign of increased oil production, and it’s critical to note that demand rebalancing is majorly what oil traders are focusing their minds on, as traders won’t forget in a hurry the stern warning signs coming from international energy bodies which include OPEC, International Energy Agency, Energy Information Administration warning gasoline demand remains fragile and is likely to slow down as the ravaging COVID-19 onslaughts grow at unprecedented levels.
Another damaging report, dampening the mind of crude oil bulls is the number of new COVID-19 caseloads in the world’s largest economy gaining for the second week in a row in 27 out of the 50 states, adding to concerns over the health of the U.S. economy.
Globally, deaths from the virus topped one million, with over 33.2 million cases as of Sep. 29, according to Johns Hopkins University data.
Also, oil trading juggernauts and leading energy experts in recent times have anticipated a blurred energy demand outlook on the bias that consumer demand will slow down in the last quarter of 2020 as economic activities in the northern hemisphere are expected to cool with the temperature, leaving refiners with a possible oil glut.
That said, for crude oil bulls to regain momentum traders, they will need more positive macros like higher odds for Trump’ reelection, as he remains the most pro-fossil political leader in more than a decade, coupled with a lasting solution to the exploding COVID-19 onslaught.
Although some experts attribute the rise, in COVID-19 caseloads to the current testing hit rates, it may take some time for Covid-19 caseloads growth starts to ease, meaning oil bulls will remain penned up for weeks or longer.