WTI bulls attempt to recover but price remains heavy in the red

• Oil prices rally in New York but remain down on the day.
• Demand-side risks mounting as the COVID-19 second wave swells and USD catches a bid.

The price of US oil is trading at $40.88 and between a range of $39.25 and $41.27, down some 0.5% on the day so far. 

The rally in the greenback, carving out a bullish chart pattern, has sapped the appeal of commodities, capping the CRB index below the October highs.

DXY daily reverse head and shoulders

The heaviness in oil prices comes despite signs of stronger demand in Asia whereby China’s crude oil imports rose 17.6% YoY to 48.5mt in September.

The swell of the second wave of the coronavirus across Europe and the US is fanning the expectations of a slowdown amid the broader rising product inventories.

However, oil did get a bit of a boost from today's crude oil stocks change.

A draw of 3.8 million barrels in the week ending October 9th was reported in a weekly report published by the US Energy Information Administration (EIA). Analysts estimate was for a decrease of 2.8 million barrels. 

''Of course, the growing use of localized lockdowns are raising fears that energy demand could once again be set to tumble,'' analysts at TD Securities explained, adding:

''Thus far, we see no evidence of this from our real-time commodity demand indicator, which continues to show a stalling but not deteriorating demand profile, nor from real-time mobility tracking. With a second wave well underway, this is the primary risk for energy bulls at the moment.''

OPEC to taper?

As for OPEC, markets are waiting to see whether the cartel will follow through with prior plans of tapering the historic output deal.

If there are signs that they will not, owing to the rising demand void, them that would be a fly in the ointment for bears.

''The strike on the OPEC+ put is nearly at the money, while upside risks including a vaccine announcement in the coming months are underpriced.

Normalizing demand expectations and OPEC+ signalling a willingness to revise their planned tapering of the historic output deal will continue to offer strong support in energy markets,'' the analysts at TD Securities argued. 

However, Russian Energy Minister, Alexander Novak, said the group is optimistic about the oil recovery and will stick with its plan for a gradual tapering of output cuts in January.

IEA warns of 8% fall in demand

Meanwhile, the IEA is less bullish.

The IEA argues that a move to bring back production will leave the market precariously balanced and limit further declines in global stockpiles.

It said demand is on track to fall 8% this year and is still only 94% of 2019 levels.

WTI levels