Oil prices continued to globally decline this morning. Experts attribute this unfavorable dynamics of the commodity market to the risks surrounding a drop in demand due to the second wave of coronavirus.
Against this background, the cost of December futures for Brent oil declined by 0.87% and reached $42.25 per barrel. WTI crude oil December futures also declined by 0.75% and stopped at $40.75 per barrel, while its November futures drop by 0.1% at $ 40.84 per barrel.
The mood of the market is highly affected by rising COVID-19 cases around the world, as well as new quarantine measures. Although the main goal is to contain the spread of the virus, a serious drop in demand for black gold is also necessary.
Nevertheless, the raw material market has a special ability to recover. It should be recalled that after a sharp drop in demand, a shard recovery followed. So, since April, the demand for oil has recovered easily and it is 92% of the pre-crisis level. At the beginning of the year, it fell by 20-25 million barrels per day, and after the lifting of quarantine measures, it recovered immediately. However, it is still too early to announce the end of the period of falling demand for black gold due to COVID-19.
In addition to all this, the uncertainty in the markets was caused by media reports about yesterday's meeting of the OPEC+ Committee. Journalists report that the meeting did not discuss changing plans to reduce oil production as part of the deal. Instead, they only made recommendations to the deal participants to adhere to its current parameters. The participants agreed to discuss longer-term plans and prospects in November. It should be noted that the Committee's new agreements started in May with a drop in oil production by 9.7 million barrels per day for a period of three months. Since August, OPEC+ continues to reduce production, but by 7.7 million barrels per day for the period until the end of 2020. In the future, it is also planned to reduce by 5.8 million by the end of April 2022.
Moreover, OPEC+ reported earlier during its annual long-term forecast that world oil demand will need at least several more years to recover. In 2022, returning to pre-crisis levels is expected.
Now, investors are waiting for a final vaccine to be released, which will cause positivity in the market. This can also play a huge role in balancing the oil markets and help restore demand.
