After ending the worst month since March, oil prices extended losses early on the first trading day in November on Monday, as more European countries announced lockdowns and as traders are bracing for volatility during and after the U.S. presidential election.
Oil prices crashed at the end of last week after a U.S. crude oil inventory build added to lockdowns in France and Germany to weigh on the outlook for global oil demand. Oil wrapped up its second consecutive month of losses in October, which was also the worst month for prices since March.
November also started with losses, after more countries in Europe announced lockdowns, after Libya’s oil production further increased, and after jittery movements in all markets ahead of the U.S. presidential election on Tuesday.
Following France and Germany, other economies in Europe announced this weekend second lockdowns amid surging coronavirus cases. Just weeks ago, the market and industry professionals were not expecting renewed lockdowns for whole countries. Late last week, Austria announced a second lockdown until the end of November, closing hotels for tourism, as well as restaurants except for takeaway and delivery. The UK, one of the largest economies in Europe, is also moving into lockdown as of this coming Thursday, and Belgium also returned to a nationwide lockdown.
The widening lockdowns in Europe put pressure on oil prices, with traders also looking for the outcome of the U.S. election.
“The pressure that we are seeing on oil will be a real concern for OPEC+, particularly with Brent now well below US$40/bbl. New lockdowns, Libyan supply, and this price pressure mean that it is looking increasingly likely that OPEC+ roll over current cuts into January,” ING strategists Warren Patterson and Wenyu Yao said on Monday.
John Hardy, Head of FX Strategy at Saxo Bank, said, commenting on oil prices:
“These latest developments are likely to keep oil under pressure with the recovery in global oil demand being postponed indefinitely. Brent crude is currently targeting $35/b, the 38.2% retracement of the April to August rally.”
By Tsvetana Paraskova for Oilprice.com
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