Oil price is pressured by the reported return of Libyan exports but it is also under pressure from Covid-19 fears. The price of crude oil has weakened from $40.7 to $37.6 in less than several days and the current price stands around $38.
Fundamental analysis: Demand for oil has weakened as air travel remains restricted
The price of crude oil is again below $40 psychological level and this could be the indication that the price could weaken even more in the upcoming days. Libya could return up to 1.1 million barrels per day of production although the International Energy Agency (IEA) cut its 2020 demand forecast.
The Organization of Petroleum Exporting Countries agreed the output cuts will remain in place till December and this will ultimately drive the market in the upcoming period. The EIA predicts that global oil demand will be 93.1 million b/d in 2020 which is down 8.3 million b/d from 2019.
It expects demand to increase by 6.5 million b/d in 2021 and the price will also rise. The US dollar has also a big influence on commodities as well and investors in oil should also have this currency on their “watch list”.
Demand for oil has weakened as air travel remains restricted and according to some reports the global flights were down by 26% from year-prior levels, cutting the need for aviation fuel. Pandemic restrictions are also cutting into fuel use and it is important to mention that August oil imports in India fell 23% to 15.2 million barrels per day.
Despite this, analysts stay “bullish” on oil and most of them are expecting an increase in oil prices for the next several months (a slow but steady rising of prices).
