After OPEC’s last weekend decision to extend its production cut, the spotlight returned to the demand story. The risk of a second wave of infections that could bring countries back into a strict lockdown remains a worry. Crude inventories rose by nearly 5.7 million barrels, EIA data showed. The sustained return in demand will be key in bringing back a rebalancing in the market. The crude market as a result of the increases in inventories will face a large overhang and a long path to reverse the inventory build while the global economic activity remains depressed.
August crude looks to be taking a leg lower from some the relative overbought levels is pointing to a bearish signal. The August’s contracts inability to hold $37 dollar level should prove to be a weak point. The contract break of this level should accelerate a move to the $36 dollar level of support. If we can see some support here we may be able to test the $37 and $38 dollar level of resistance.