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  • Texas reported its highest one-day increase in COVID-19 case numbers.
  • WTI is trading over 1% lower at $35.72 after falling from a high of 436.31 to a low of $35,58 so far in the Asian session. 

The price of a barrel of crude oil is on the back foot during the Asian session and is embarking in a test of the overnight lows at $35.40 in WTI.

At the time of writing, WTI is trading over 1% lower at $35.72 after falling from a high of 436.31 to a low of $35,58. 

Risk assets are crumbling amid a risk-off tone across markets as investors fret about the second wave of infections of the coronavirus and a sombre outcome from yesterday’s Federal Reserve meeting.

  • Biggest decline in the S&P 500 since mid-March, losers fit well with second virus wave fears

There was some late news in the day which hammered in the nail for US sentiment that Texas reported its highest one-day increase in COVID-19 case numbers, on Wednesday.

Florida reported the most cases of any seven-day period and California’s hospitalisations are back at their highest since 13 May. 

However, crude-oil futures had already dropped Thursday in tandem with a sell-off in US stocks while investors weighed both demand and supply bearish fundamentals.

Supply bearish fundamentals

Stockpiles of the black gold in the US rose by 5.7 million barrels for the week ended June 5,  much higher than the market had been expecting. Analysts polled by S&P Global Platts for an average decline of 3.2 million barrels. Inventories of gasoline and distillate fuel also rose.

“Over one million barrels of oil will be returning to the market, as Gulf nations curtail their massive voluntary cuts,’ analysts at TD Securities explained. 

As risks emerge, WTI may again drift down to just under $35/bbl and Brent to $38.50/bbl, which prompted us to take profits on our Long WTI Dec-Dec spread trade.

The analysts cite concerns that shale production cuts may ease continue to loom over markets, as prices surge toward breakevens. 

We see risks emerging, due to the less-than-stellar supply projections. With refinery runs in the US struggling to pick up despite the modest demand-side normalization, the projected 2 billion bbls inventory accumulation during H1-20 may take longer-than-expected to unwind. 

WTI levels