The price of crude oil continues to decline Friday morning amid news of the deteriorating situation of the coronavirus pandemic around the globe. This time, the decline in the oil market has already become quite deep, and prices have reached the minimum levels recorded in mid-September of this year. Everything is heading for the second consecutive weekly decline.
The price of futures contracts for Brent crude oil for delivery in December on the trading floor in London sank immediately by 2.64% or $1.08, which forced it to move to the level of $39.85 per barrel. It is alarming that the black gold could not keep the strategically and psychologically important mark of $ 40 per barrel. Thursday's trading session ended with a drop in value by 3.2% or $1.37 per barrel.
The price of futures contracts for WTI crude oil for delivery in November today on the electronic trading platform in New York also went down by 2.89% or $1.12, which pushed it to the level of $37.60 per barrel. Thursday's trading ended in the negative zone with a decrease in the price by 3.7% or $1.5.
Market participants are primarily concerned about the level of demand for raw materials, which is under significant pressure amid the news of the second wave of the coronavirus pandemic. Even the very encouraging data on the level of black gold reserves in the US could not have a positive impact on the situation. Recall that the Department of Energy already announced the third consecutive reduction in reserves on Wednesday. At first, the market met these messages with a positive response, but then the pressure from the outside turned out to be much greater, and the negative trend again became predominant.
Despite the current contraction, analysts still argue that demand will be extremely limited in the near future, as several factors indicate this at once. First, the increase in production in some countries, such as Libya, can cause an even greater oversupply. Second, the second wave of the pandemic and the return of restrictive quarantine measures are the biggest threats to the demand for crude oil.
There is disappointing news from various countries about the re-introduction of quarantine measures. The Spanish government, in particular, together with the authorities of Madrid, decided to partially reimplement the lockdown of the entire city and surrounding areas due to the rapid spread of COVID-19.
Paris and its environs have banned the operation of bars, as well as mass events, even family events starting Monday next week,
Experts are increasingly beginning to talk about the restriction movements between European countries, which, of course, makes investors worry even more about the recovery in the demand for raw materials. This only suggests that we should not expect improvements in the short term, or even in the medium term. Some particularly radical analysts say that the raw material market will recover over the next two to three years after the pandemic.
Another unexpected news on Friday put the strongest pressure on the cost of raw materials. US President Donald Trump and his wife both tested positive for coronavirus infection. This means that both of them will have to go to quarantine, while the election race continues. All this triggered a wave of panic among investors who rushed to save their capital in the defensive assets sector.
OPEC also adds to the negativity after announcing the need for an additional reduction in oil production by about 2.375 million barrels per day. This is what is not enough to fully cope with the debt that has arisen and compensate for the excess that has arisen earlier.