28.09.202012:05 Forex Analysis & Reviews: Oil could not get out of the negative trend

The price of crude oil showed negative dynamics Monday morning as future prospects of global demand for black gold remain uncertain. The situation is further aggravated by the intention of the Libyan authorities to increase the production of raw materials on their territory.

Oil production in Libya has already increased and has doubled the previous values. At present, production amounts to 250,000 barrels per day. This growth is due to the lifting of the blockade on oil fields. Moreover, vessels have already been assembled in the country's ports to pump oil from storage facilities, which in turn indicates that the reserve tanks will be filled with black gold during the newly started work. And the oil that is unloaded will enter the market and create an even greater supply of surplus, which will be a serious threat to the recovery of demand for raw materials in the near future.

Most analysts point to the fact that a bearish trend is gaining momentum in the oil market, which will hardly be eliminated in the near future.

Another extremely unpleasant and threatening factor for oil raw materials is the reintroduction of restrictive quarantine measures for the tourism sector in most countries which are gravely affected by the coronavirus pandemic. If this happens, the reduction in the price of oil will intensify since problems in the tourism sector are the main catalyst for the fall in the black gold market.

The price of futures contracts for Brent crude oil for delivery in November on the trading floor in London dropped 0.67% or $0.28. This forced it to move to the level of $41.64 per barrel. Friday's trading also ended in the red zone with a drop in the price by 0.05% or $0.02.

The price of futures contracts for WTI light crude oil for delivery in November on the electronic trading platform in New York also went down by 0.8% or $0.32, leaving the current price at $39.93 per barrel, falling below the strategically and psychologically important mark of $40 per barrel. Friday's trading also ended with a reduction of 0.2% or $0.06.

In General, crude oil prices for both brands decreased Friday last week. Brent declined by 2.9%, and WTI became cheaper by 2.6%.

The initiative in the crude oil market is still on the side of the sellers, which has several significant fundamental factors. First, the outbreak of coronavirus infection worldwide has become more aggravated: the number of new cases is growing rapidly. This puts pressure on the prospects for the recovery of global economies, which are already having a very difficult time getting out of the crisis caused by the pandemic. Second, the increase in the number of drilling rigs for oil production in the US added to the troubles with an additional 4 more units marking a total of 183 units. This increase was the first since the end of the summer of this year, which did not please market participants at all.

Negative prospects are also perceived in the oil market for the current week, as raw materials will remain under pressure from existing factors. In addition, the dynamics of the price of black gold will be largely determined by the movement of the US dollar. Recall that the dollar is looking forward to the adoption of a program of additional stimulus measures in the US. If the two opposing camps in the government still managed to find a compromise solution to this acute issue, the dollar will collapse, which will become a support factor for oil and an opportunity to recoup accumulated losses.