Crude Oil Continues its Drop as OPEC Sounds the Alarm

Summary:

Crude oil continues to fall as the second wave of coronavirus takes hold. Additional lockdown restrictions are leading to fears of a demand slump.

Crude oil continues to fall as the second wave of coronavirus takes hold across Europe and the U.S.A. Additional lockdown restrictions are leading to fears of a demand slump and this will put pressure on OPEC to ditch their planned production cut in December.

OPEC’s Mohammad Barkindo told a virtual conference that the recovery in the global economy would be slower, saying:

“We were hopeful the second half of 2020 would begin to see a recovery. Unfortunately, both the economic growth and demand recovery remain anaemic at the moment due largely to the virus.”

OPEC has been steadily lowering its forecast for 2021 demand this year and sees demand rising by 6.54 million barrels per day (bpd) to 96.8 million bpd. This was slashed by 80k bpd a month ago but the recent surge i cases will see this revised lower once again.

Oil was also suffering on Wednesday after the latest inventories report from API said crude stocks should rise by 4.6 million barrels for the week, compared to market expectations of 1.2 million, so the weaker demand picture is already filtering through.

Crude Oil Technical Outlook

Crude oil continues to head lower after a failure at $41.44 and a drop below the moving average. The support level marked was $37.20 and crude should test this on the week. Oil will need a bullish close above $39.00 to move higher. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.