Oil Tries To Settle Above The $41 LevelOil continues to gain ground on hopes that an effective vaccine will solve the market’s problems.
Oil Video 10.11.20.
Oil Continues To Gain Ground As Investors Hope That An Effective Vaccine Will Boost Demand
Unlike stocks, oil managed to continue its upside move and is trying to settle above the $41 level.
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The recent price action highlighted oil’s sensitivity to pandemic-related news. At the beginning of November, oil made an attempt to settle below the $34 level on fears that lockdowns in Europe will put pressure on demand.
Since then, the near-term fundamental situation has deteriorated as new anti-virus measures were announced in various countries, but oil managed to get back above the psychologically important $40 level as traders bet that an effective coronavirus vaccine will solve most problems of the oil market.
Interestingly, CEO of energy trader Vitol has recently stated that oil could reach the $50 level in the next few months. While he was talking about Brent oil, the current spread between WTI and Brent is about $2 for the January 2021 contract, so WTI oil should also have a good chance to get close to the $50 level if Vitol’s forecast comes true.
Most likely, traders will need to see a continued decline in crude inventories levels before they will be ready to bet on oil at levels above summer highs at $43.75.
Libya’s Oil Production Reaches 1 Million Barrels Per Day
Libya continues to rapidly increase its oil production. The country is exempt from the OPEC+ production cut deal due to the civil war, and it is boosting its production to repair its finances after months of intense fighting.
Most analysts believed that Libya would need more time to boost production as infrastructure could have been hit during the civil war. However, skeptics were proven wrong, and Libya’s production is rising day by day.
This is a major challenge for the oil market since current demand is hurt by lockdowns in Europe. While current lockdowns are not as strict as the lockdowns at the beginning of the pandemic, IEA has recently noted that demand in Europe would decline.
It remains to be seen whether demand growth in other parts of the world will be able to offset the negative impact of European lockdowns. At this point, it looks like the market hopes that OPEC+ will be able to extend current production cuts for at least the first quarter of 2021 which will provide support to oil prices.
For a look at all of today’s economic events, check out our economic calendar.