Oil prices slide on fears of second wave of Covid-19 cases
Oil prices are trading marginally lower on Wednesday as fears of a second wave of Covid-19 cases weighs on financial markets.
Oil prices are trading marginally lower on Wednesday as fears of a second wave of Covid-19 cases weighs on financial markets.
Brent crude is down 14 cents, but remains above the $40 mark at $40.82 a barrel at the time of publication, while the US West Texas Intermediate (WTI) is down 25 cents to $38.13 a barrel.
It is worth noting that both benchmarks climbed more than 3% higher on Tuesday after the International Energy Agency (IEA) increased its 2020 demand forecast to 91.7 million barrels per day.
A panel led by OPEC plans to meet on Thursday to ensure that oil producing countries comply with the production cuts the group agreed to prolong throughout July in a bid to stabilise oil prices.
Steroid treatment helps cut Covid-19 death rates
Despite slipping lower on Wednesday, oil prices have managed to creep above the psychological $40 mark, with investors excited about the prospect of an economic recovery amid an easing of lockdown restrictions around the world.
Investor sentiment has also improved slightly after a clinical trial showed that a cheap steroid may be able to help save critically ill coronavirus patients.
The World Health Organisation (WHO) said that it will update its guidelines after clinical trials showed that the corticosteroid medication dexamethasone reduced death rates among Covid-19 patients by almost 33%.
However, investors remain concerned about a second wave of infections forcing governments to reintroduce strict lockdown measures which would bring the global economy to a standstill once again.
WTI resumes its move higher
After rallying towards $39.30, the WTI price fell back yesterday, but overnight weakness has been contained around $37.40, according to Chris Beauchamp, chief market analyst at IG.
‘Further gains target $39.00 and then on towards $40.60 in the short term, while beyond this $42.60 comes into view,’ he added. ‘A more bearish view requires a drop below $37.00 that then targets $34.50.’
Investors believe stock market is ‘overvalued’
According to a recent survey carried out by Bank of America (BofA), 98% investors said that they think the financial markets are ‘overvalued’ after rebounding from March lows due to global governments stimulus packages to offset the economic impact of the Covid-19 pandemic.
Cash levels at fund managers fell in June to 4.7%, down from 5.7% the month prior, with 93% of investors surveyed admitting they were growing increasingly concerned about the prospect of a prolonged recession.
BofA said in the report that the recent rise in investor optimism remains ‘fragile’ and unlikely to be maintained amid the myriad of macroeconomic headwinds.
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