Investors are increasingly pessimistic that the global economic recovery will accelerate
Libya wants to increase the supply on the market
Crude oil prices have fallen 7% in the last two weeks and are trading around the $37 mark
Crude oil prices fell by around 7% in the last two weeks on Monday as concerns about the delayed global economic recovery are high. In addition, the problems related to Libyan supplies are causing more headaches for oil bulls.
Fundamental analysis: global economic recovery slower than expected
Investors are increasingly pessimistic that the recovery of the global economy will accelerate before the end of the year.
(“Coronavirus”) infection rates are on the rise again, localized lockdowns have been introduced in a growing number of countries, which are hampering regional economic growth, and the number of unemployed is not falling significantly,” said Tamas Varga, analyst at PVM Oil Associates Ltd.
“This leads to a gloomy growth in oil demand,” he added.
Regardless, Libyan commander Khalifa Haftar decided to lift the several-month interruption of oil facilities, a decision that would increase supply in the market. However, it is still unclear whether the oil fields and ports would resume operations.
“The announcement that the blockade of Libyan oil export terminals may end soon will add to the suffering of this week’s OPEC+ meeting,” said Jeffrey Halley, senior market analyst at OANDA.
OPEC+, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, has scheduled a meeting on September 17 to discuss how to meet the deep cuts in production. Analysts assume that there will be no further production cuts.
Tropical Storm Sally has gained momentum in the Gulf of Mexico and is well on its way to becoming a Category 2 hurricane. This is the second time that storms have disrupted oil production.
Technical analysis: price slide down
Crude oil prices for both Brent and crude oil are in the red for the second consecutive week. Prices for the latter have fallen 7% in the last two weeks and are trading around the $37 mark. The bulls failed to break above the $42 mark, which is an important bull/bear line for oil traders.
Crude Oil Weekly Chart (TradingView)
Therefore, this failure will probably facilitate further sales in the coming weeks. The next support level is $35 and it is likely to provide sufficient cover if the price action wears off again. In the long term, levels around $26 should provide considerable demand.
Crude oil prices slipped due to the global slowdown in economic recovery and concerns about renewed Libyan oil supplies. Sellers are now in control and are likely to target $35 next.