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Crude oil touched the lowest levels since the start of the month on Tuesday as investors fretted over the pace of reopening in the world’s major economies. Better-than-expected US crude oil inventories data from the American Petroleum Institute helped push oil higher on Wednesday, with WTI briefly spiking above $41.00 before pulling back to trade below the long-term resistance level.

Crude oil remains rangebound ahead of this week’s main events, with $41.00 providing resistance and support at $39.00.

Oil unsteady as California orders bars to close

Risk sentiment has been knocked across the board after Californian governor Gavin Newsom ordered bars across the state to close and indoor operations to halt in restaurants, cinemas and museums.

The measures have raised questions over how quickly the world’s major economies can afford to reopen. California’s shutdown was prompted by an increase in the average number of new Covid-19 cases to over 8,000 per day during the past week.

OPEC committee to review production cuts

The timing of the shuttering in California is particularly troublesome for the oil markets, given that OPEC’s Joint Ministerial Committee meets this week to review the level of production cuts. The cartel is expected to taper the level of cuts by about 2 million barrels per day from August, down from the current record 9.7 million bpd.

OPEC Secretary General Mohammad Barkindo had said on Monday that the gradual easing of lockdown measures across the globe, in tandem with the supply cuts, was bringing the oil market closer to balance. An unwinding of the cuts just as some economies put the brakes on activity again threatens to send oil prices lower.

EIA data: Draw expected, but are the forecasts accurate?

Prices are also being kept contained ahead of the US Energy Information Administration’s weekly crude inventories report. The latest EIA data is expected to show a draw of 2.275 million barrels after last week’s surprise build of over 5.6 million barrels.

Oil rallied yesterday after the American Petroleum Institute predicted a weekly draw of 8.3 million barrels, smashing expectations for a 2.275 million barrel drop in storage volumes.

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