Oil Slides As Virus Worries ReturnOil finds itself under pressure ahead of the weekend as traders focus on the increasing number of coronavirus cases in some U.S. states.
Oil Video 26.06.20.
The Oil Market Remains Undecided About The Threat Of The Second Wave
Yesterday, we discussed oil demand recovery as cars got back on the roads. Today, oil is losing ground due to fears that the second wave of the coronavirus pandemic will lead to new restrictions and put pressure on oil demand.
Obviously, the fundamental situation cannot change in just one day. The oil market remains very sensitive to traders’ sentiment. The sentiment is negative today since even the news about foreign mercenaries on Libya’s Sharara oilfield failed to provide support to oil prices.
Libya, which has been torn by a civil war, continues to have problems with the restart of its major oilfield which is capable of producing about 300,000 barrels per day (bpd).
While nobody expects that Libya will be able to reach such production levels anytime soon since the war has put pressure on the country’s infrastructure, a gradual return of Libya’s production would be a negative development for the oil market which continues to suffer from elevated inventory levels.
However, Libya’s troubles are ignored by the market which is focused on the increasing number of coronavirus cases in certain U.S. states.
At this point, it looks like the upcoming inventory and production reports will help oil traders decide whether they should worry about the virus or not.
Will U.S. Domestic Oil Production Continue To Increase?
In my opinion, the main topic of the next week for WTI oil traders is whether the U.S. domestic production will get above 11 million bpd.
This week’s report surprised the market as U.S. domestic oil production has suddenly increased from 10.5 million bpd to 11 million bpd. This was a sign that prices close to $40 per barrel can attract new production. However, the key question is how much production will be restored if oil stays near $40.
If the upcoming reports show that the recent increase was a one-time event, oil will have solid chances to get past $40 in the near term. However, a rapid increase of production could make the $40 level a true wall for oil, especially in the light of challenging situation on the coronavirus front.
For a look at all of today’s economic events, check out our economic calendar.