Why oil prices may fall further

The main oil benchmark fell below $ 40 a barrel this week as clouds gathered on the outlook for demand and supply amid an increase in Kovid-19 cases in Europe and the United States. And they can fall further. Reuters’ John Kemp Reported On Tuesday, hedge funds sold enough oil last week to compensate for the support price of $ 40 a barrel bought last week. But now, a resurgence in Kovid-19 is fueling fears of a double-dip recession in two major markets, a warrior attitude to crude oil.

Meanwhile, Restad Energy, What was said On Monday, it was expected that global oil demand would peak in eight years. This was the latest in a string of pessimistic forecasts on oil demand, all of them citing the epidemic as a major factor determining future trends. The forecast is a revision of peak oil demand to occur in 2030 over a predecessor, with the company citing congestion for an energy energy future as another firm factor.

At the same time, OPEC appears divided into the next stages of oil production control. While some members are determined to keep a lid on output to support prices, others are getting impatient to resume production growth. According to a recent Reuters Report good, Some OPEC members wanted to start producing more oil from January, citing sources from the cartel and the oil industry.

“Countries are suffocated with these cuts, it is very difficult to continue with them even next year,” one of these sources told Reuters.

It is telling that some OPEC members would prefer to sell more pumps and oil at weaker prices than keep the curb and sell at a higher price. This also suggests that internal divisions at OPEC could deepen if prices remain low as the Kovid-19 case continues.

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According to Reuters Kemp, investors and traders do not seem to be concerned about OEPC + cuts. There is optimism Nevertheless, it is not enough to induce one to buy more oil due to demand outlook. Demand Outlook, for its part, is increasingly tied to the epistemic approach, and is very pessimistic right now.

This week, of course, another factor will add to the volatility in the oil market, and this is the US presidential election. Trump’s win for prices in the short term is likely to accelerate, but perhaps not because of his support for the oil and gas industry in the long run which could mean increased production down the road.

A Biden victory could be the opposite: negative in the immediate but long term as oil increased regulation, and partial restrictions on fracking would tighten supplies according to Goldman Sachs. On the other hand, Biden could have reached an agreement with Iran, which would mean more Iranian crude would come into the market.

Analysts said oil, meanwhile, is expected to continue trading within a range until the end of the year, with Brent’s full-year average of $ 42.32 per barrel for 2020 and a slight increase from $ 49 per barrel in 2021 Will be. The only thing that can move the benchmark high enough. There will be some good news from the vaccine development front or a decrease in production in Libya, which is accelerating production with lightning speed: the country recently produced 800,000 bpd, down from 100,000 bpd at the end of September.

As Libya continues to boost production, the impact of US elections comes and goes, and as demand remains depressed, prices may remain below $ 40 at the moment, particularly drilling and With fracking. Bounce back In the United States, putting more pressure on the benchmark. The only hope of prices seems to be vaccine news. Whatever the OPEC + has decided to do since January, any lower cuts have already led to a reduction in traders’ buying and selling decisions.

By Irina Slavin for oilprice.com

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