Oil Gains Ground Despite Worries About Second Wave In Europe
Oil video 10/19/20.
Oil ignores new restrictions in Europe
While many European countries have put in place various restrictions related to viruses, most of them have avoided serious bans. Wales, which is part of the United Kingdom, was the first to announce a new lockdown to contain the second wave of the virus.
The lockdown begins on Friday and lasts for two weeks. During this time, most citizens will be working from home while all non-essential businesses will be shut down.
Such lockdowns are causing significant damage to oil demand, but oil traders have managed to allay demand concerns and continue to support oil near $ 40 levels.
Perhaps traders are betting that OPEC + will maintain the current production cuts for a few more months instead of increasing production levels by 2 million barrels per day (bpd) from January 2021.
Recent reports suggest that OPEC + countries are concerned about the current pace of recovery in oil demand. OPEC + cannot afford another collapse in oil prices as this signals that it has lost control of the oil market.
With that in mind, OPEC + members may want to suffer from lower production levels for a few more months to show that OPEC + is still the leading player in the market.
Libyan oil production rises to 500,000 bpd
According to a recent Bloomberg report, Libya managed to bring its largest oil field, Sharara, back into operation, increasing its total production to 500,000 bpd. The increase in Libyan production is another headache for OPEC +, as Libya is exempt from the production cut due to the civil war.
Sharara's production capacity is approximately 300,000 bpd, but current production is 110,000 bpd. Thus, the field has a lot of room to increase production, even if we take into account the potential damage that the civil war has wreaked. The continued surge in Libyan oil production is certainly a negative catalyst for the oil market.
In addition to Libya, oil traders will pay close attention to U.S. oil production as the latest report by Baker Hughes Rig Count found the number of U.S. oil rigs increased by 12 to 205.
Most likely, the upcoming EIA Weekly Petroleum Status report will point to an increase in domestic oil production in the US. Unless this surge is accompanied by higher demand, crude oil stocks will rise and put pressure on the oil price. Tomorrow, traders will have the opportunity to view the latest inventory data since the API report on the change in crude oil was released.
In our economic calendar you will find all economic events of today.
This article was originally published on FX Empire
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