U.S. West Texas Intermediate and international-benchmark Brent crude oil are edging lower on Tuesday in a lackluster, pre-holiday trade. Traders seem to be trying to balance the recent improvements in the economy against the impact of rising coronavirus cases. Traders even showed little reaction to better-than-expected Chinese manufacturing data.
Later today, investors will get the opportunity to react to the American Petroleum Institute (API) Weekly Inventories report. It is expected to show a small drawdown.
Prices could fall sharply lower if there is another inventory build because of the already existing oversupply concerns. Furthermore, investors are already worried that some U.S. firms may begin ramping up production by the end of July.
A surge in coronavirus cases is also a growing concern because of its potential negative impact on fuel demand. Earlier today, U.S. Federal Reserve Chair Jerome Powell warned that the outlook for the world’s biggest economy was “extraordinarily uncertain”. Meanwhile, California and Texas saw record rises in new infections on Monday while in Britain, a reinforced lockdown was imposed in the city of Leicester.
Oil Major Shell to Write Down Up to $22 Billion of Assets in Second Quarter
Just a couple of days after oil shale giant Chesapeake filed for bankruptcy, oil giant Royal Dutch Shell said on Tuesday it will write down the value of its assets by up to $22 billion in the second quarter, after revising down its long-term outlook for oil and gas prices.
It comes after the energy company announced in mid-April an ambition to reduce greenhouse gas emissions to net zero by 2050, CNBC reported.
Shell said in a statement to investors that it had reviewed a significant portion of its business given the impact of the coronavirus pandemic and the “ongoing challenging commodity price environment.”
Chesapeake Energy Files Bankruptcy
On Sunday, fracking giant Chesapeake Energy announced its bankruptcy filing. Chesapeake’s share price has fallen nearly 93% in 2020.
“While today is a challenging day, your leadership team and I are confident that this is the best path forward for Chesapeake, and that we will emerge from the Chapter 11 process as a stronger and more competitive company,” CEO Robert D. “Doug” Lawler said in a memo to employees.
Concerns of demand destruction, rising COVID-19 cases, simmering U.S.-China trade relations and record U.S. supply are all negative factors that could keep a lid on crude oil prices.
On Tuesday, traders are likely to take their cues from risk sentiment and the API inventories report at 20:30 GMT.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire