Is November a good month to buy oil?

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Global demand for oil will return to pre-pandemic levels in 2022
COVID 19 cases in the US continue to rise, while Europe is not doing any better with this pandemic
If the price falls below $35, it would be a “sell” signal, and we have the open road to $30.

The price of crude oil rose above $39 in the past week of trading and is currently around $37. Crude oil remains under pressure from growing fears that new restrictive measures could significantly reduce demand for oil.

Fundamental analysis: There is still no clear trend for oil

Crude oil remains below the psychological level of 40 dollars as OPEC has announced that global oil demand will return to pre-pandemic levels in 2022. The coronavirus crisis has already reduced global oil demand and OPEC has decided to limit production until December.

Demand for oil has also weakened as air traffic is still restricted and some reports indicate that worldwide flights were 26% lower than in the previous year. Joe Biden won the presidential election in his native Pennsylvania on Saturday and will be 46 years old.

He has 290 votes, which is more than enough to win the White House and deny President Trump a second term. This could have a long-term positive effect on oil prices and, together with optimism about vaccines/treatments, should prevent massive sell-offs.

Investor attention is also focused on the negotiations on the U.S. stimulus package and the situation related to the COVID 19 pandemic. COVID-19 cases in the US continue to increase, while Europe is not doing any better with this pandemic.

The US reported more than 100,000 new cases in one day, and the pandemic brought US hospitals to the brink of capacity. This is certainly not good for the economy and crude oil prices will be linked to the global economic outlook.

There is still no clear trend in oil prices, but analysts remain bullish on oil and most of them expect oil prices to rise (a slow but steady increase) in the coming months.

Technical analysis: Bears focus on breaching the support level at $35
Data source: tradingview.com

On this diagram I have marked important resistance and support levels. The important support levels are $35 and $30, $40 and $45 represent the resistance levels. If the price jumps above $40 it would be a signal to buy oil and we have the open path to $45.

A rise above the $50 level supports the continuation of the upward trend and the next price target could be around $55. On the other hand, if the price falls below the $35 mark, this would be a “sell” signal and we have the open path to $30.

Summary

Crude oil is still under pressure from growing fears that new restrictive measures could significantly reduce demand for oil. There is still no clear trend in oil prices, but analysts remain bullish on oil and most of them expect oil prices to rise in the coming months. In the medium term, crude oil prices will be related to the global economic recovery and concerns about oil demand. I believe that the price of oil may drop below $35 in November, but if the price jumps above $40, it would be a “buy” signal.

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