Crude oil continues to get cheaper. The lowest price for 5 months

The gigantic increase in production in Libya, the lockdown in Great Britain and another hundreds of thousands of cases in Europe and America, as well as the uncertainty before the presidential elections in the USA - one of these reasons would be enough to drop oil prices, but they all came together at the same time already reaches the minimums from 5 months ago.

This week looks very interesting on the oil market. Specialists forecast declines because virtually all events and information from global markets are favorable to them. One thing is certain - the price of crude oil will definitely not smoothly drift sideways. Big and dynamic movements await us. Probably also in unexpected directions.

Oil prices have been falling since last week. The West Texas Intermediate barrel for December delivery on the NYMEX fuel exchange in New York is trading at $ 34,48. Brent crude oil for December deliveries on the ICE Futures Europe fuel exchange in London is trading at USD 36,74 per barrel. This is a decrease of 4% during the day. Crude oil on NYMEX decreased by 20% from October 2020, 17.

What is the reason for this and how will the market behave in the coming days and weeks?

Brent crude oil chart, D1 interval. Source: xNUMX XTB.

Libya continues to produce

One of the main reasons for the fall in oil prices is the uninterrupted and increasing supply, which is primarily the responsibility of Libya. At the beginning of September, the country was producing 100 thousand. barrels of oil, which supported the price, because the supply did not flood the market. Meanwhile, Libya currently produces 800. barrels of oil per day and is not going to stop there. In January 2021, it wants to reach the level of 1,3 million barrels of oil a day!

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The coronavirus is not giving up

It completely spoils the plans and oil price management for the OPEC + alliance, which previously agreed that production will increase from January 2021. Now he thinks about April at the earliest.

Meanwhile, the market is systematically flooded with oil from Libya and the price is falling. The demand is not increasing at all. Air traffic is still very limited, car fuels are not selling as well as at the beginning of the year because many people work remotely.

In addition, more countries are introducing restrictions due to the coronavirus. Germany and France will have restrictions for the next few weeks. The United Kingdom is introducing a total lockdown on Thursday, because it has already reached 1 million infected, and smaller countries - such as the Czech Republic and Slovakia - even have emergency states with a curfew, and the demand for oil has fallen drastically there.

Will there be a new US president?

Another poll ahead of Tuesday's US presidential election, which gives Joe Biden more chances than Donald Trump, also creates anxiety among investors. The old rule of the stock exchange is that the known evil is better than the unknown good. Everyone is used to Donald Trump and his policies, but the victory of his rival is again uncertainty about the direction in which the economy of the most powerful country in the world will develop.

- "We have" witches "in the oil market: it is the presidential election in the US, England joins the countries with an economic blockade and the increase in oil production in Libya," says Vandana Hari, founder of Vanda Insights. - "It is difficult to say how exactly the market evaluates the US election: perhaps there is a greater chance of a Biden victory, which may lead to the resumption of oil supplies from Iran, and maybe there is a risk of a dispute over the election result" - adds the analyst.