Oil Moves Back Below The $40 LevelOil is losing ground amid rising production in Libya and worries about the pace of demand recovery.
Oil Video 29.09.20.
Oil Loses Ground Amid Worries About The Pace Of Oil Demand REcovery
Oil moved below the $40 level as concerns about the future pace of oil demand recovery weighed on prices. In addition, traders are a bit nervous ahead of the first U.S. presidential debate between Donald Trump and Joe Biden.
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Democrats favor policies that could limit demand for oil and boost demand for renewable energy, so a potential Biden victory may serve as a negative catalyst for the oil market.
At the same time, oil simply lacked additional upside catalysts ahead of the release of API Crude Oil Stock Change report. If inventories continued to decline at a healthy pace, oil may reverse its course and quickly get back to the $40 level.
Libya’s Oil Production Returns To The Market
While OPEC+ producers remain constrained by the production cut deal, Libya begins to increase its oil production.
The civil war and the blockade of its ports pushed the country’s oil production to levels below 100,000 barrels per day (bpd).
However, the sides of the Libyan conflict managed to reach a deal which eliminated the blockade, so the country’s ports can export oil to the world market.
As a result, Libya quickly managed to increase its oil production to 250,000 bpd and more oil may soon get to the market if the current deal between the internationally recognized government and General Haftar holds.
This is a big question since previous attempts to reach a deal that would have allowed Libya to increase its oil production failed rather quickly.
Previously, Libya was able to produce 1.2 million bpd so there is plenty of room to increase production. Most likely, some infrastructure was damaged by war so oil traders should not expect a return to full production capacity anytime soon.
However, a continued increase of Libya’s oil production may put some pressure on the market in case demand recovery stalls due to the second wave of coronavirus.
At this point, the second wave remains a key threat to oil price upside. However, most governments have so far managed to avoid lockdowns which bodes well for oil demand recovery.
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