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Pressure Continued On Dropping Oil Prices

On Thursday, Oil prices remained dispersed on the day as on Nymex, the December contract for U.S. light crude (WTI) fell to $41.12 after losing 0.8 percent while the Brent January delivery contract closed at $44.05 rising 0.6 percent on the day.

Global markets are showing signs that a wide variety of volatile assets, including oil futures, are easing the hype from the vaccine news and profit-taking. At the same time, investors’ attention turned to the fact that the beneficial impact of the vaccine would be evident no sooner than six months or even longer, and that oil demand would remain under pressure until then.

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The International Energy Agency (IEA) also holds this position, which was expressed in the monthly analysis of energy markets published yesterday. Global oil demand will decline by 1.2 million barrels per day in the current quarter, according to the IEA, while the pandemic’s negative effects will be felt in 2021.

Moreover, data from the EIA on crude oil reserves in the United States has exerted pressure on oil prices. For the week ended November 6, after a production-cut of 7.998 million barrels a week earlier, the indicator suddenly increased bringing the reduction of oil production to 4.278 million barrels, while analysts had predicted a decrease of 0.913 million barrels.

The continued growth of oil production in Libya is also worth noting. The amount of oil production in the country has already surpassed 1.1 million barrels a day according to the latest reports, and is close to the level of the pre-war blockade of 1.2 million barrels a day. Recall that Libya has not participated in the OPEC+ Production Limitation Agreement, and is thus not bound by the obligations of this Agreement. Certainly, in the light of weakening demand due to the pandemic, the increasing volumes of oil produced in the country may have a negative effect on the world prices of ‘black gold.’

At the same time, if the existing OPEC+ quotas are extended from January 2021, oil prices may get a boost. Currently, according to Bloomberg, the countries involved in the agreement are actively negotiating to delay the expected rise in oil production for a period of three to six months from the beginning of 2021.

As regards the oil market figures, the release of weekly data on the number of active drilling rigs in the United States by the American oil service company Baker Hughes will have to be monitored today which has increased by 5 units at the end of last week, to 226 units.

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