Fear of Crude Oil Market being Saturated Lingers on

At the time of writing, Brent crude and West Texas Intermediate had lost about 1%, howbeit both oil contracts remained above $40/Barrel.

Both crude oil benchmarks have gained more than 9% gains in the previous week, recording their biggest weekly gain in the case for Brent crude since June.

With the expected return of exogenous supply and as short-term constraints begin to ease, it’s not surprising to see the black liquid hydrocarbon falling, as growing fears on strong bias that the crude oil market might be getting saturated lingers on.

Since oil production has begun in America’s major hub and recent reports say Libya’s Sahara field will be producing 40,000 barrels of oil per day before reaching its optimal capacity of almost 300,000 barrels in some days’ time, Oil traders are becoming wary that crude oil demand/supply rebalancing might not be feasible in the prevailing economic climate.

Also on the back of many oil traders’ mind is the exploding rate of COVID-19 cases globally, amid a high contested U.S election coming up in a few weeks’ time, as further blew the needed gas for crude oil to breakout from the price range between $38.50-$45/barrel in the near and mid-term.

Although OPEC+ should be given credit for supporting oil prices to this present level, what remains to be seen, is if the oil cartel will remain committed in the long term in reducing their oil output quota, amid pending budgetary deficits seen in economies, negatively affected by the disruption of the COVID-19 pandemic.

That said, some traders are holding on to their positions on the likely winner of the U.S election, as President Trump re-election will be good for crude oil bulls, though his odds for reelections seem to be dwindling like the ice-cream in the sun.

Finally a registered COVID-19 vaccine readily available in the mid-term could propel crude oil prices near $50/Barrel.