Oil Continues To Lose Ground On Demand Worries

Oil Video 30.10.20.

Some OPEC+ Members Reportedly Want To Boost Their Oil Production From January 1, 2020

The surge of coronavirus and the recently announced anti-virus measures in European countries leave OPEC+ with no choice but to extend the current oil production cuts for at least another three months.

However, a recent Reuters report suggested that some countries – Kuwait, United Arab Emirates and Iraq – were willing to find a way to increase their production at the beginning of the next year.

Interestingly, Kuwait has already stated that the country would support any OPEC+ decision, while UAE and Iraq did not make any comments about recent reports.

Iraq has the biggest problems as the country is in a poor economic shape and needs to increase its revenue from oil exports.

Most likely, additional weakness of oil prices will be sufficient enough to convince all OPEC+ members to stick to current production cuts instead of boosting production at the beginning of 2021. Negotiations would become more challenging if oil returns to the $40 level.

Oil Needs A Pause In The Constant Flow Of Bearish News To Have A Chance For A Rebound

This week was full of bad news for oil. France announced a nationwide lockdown, Germany decided to close bars, restaurants and gyms while the number of new coronavirus cases in the U.S. continued to increase at an alarming pace.

In addition, EIA reported that crude inventories increased by 4.3 million barrels. EIA has also stated that gasoline demand increased from 8.29 million barrels per day (bpd) in the previous week to 8.55 million bpd, but it remained well below 9.78 million bpd recorded a year earlier. I’d also note that many traders are nervous ahead of U.S. election.

In the near term, the main hope for oil bulls is that Saudi Arabia and Russia will agree to extend current oil production cuts and put pressure on other OPEC+ members to comply with the deal.

Obviously, this hope alone cannot provide enough support to oil prices at a time when additional bearish news are published on a daily basis. In this light, oil needs a pause in this flow of bearish news to have a chance to consolidate near current levels and set the stage for a rebound. It remains to be seen whether oil will get such a pause during the next week which is expected to be very volatile due to U.S. presidential election.

For a look at all of today’s economic events, check out our economic calendar.