The oil price rose when Hurricane Delta shut down production.

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Crude oil produced on a weekly basis
Hurricane Delta paralyzed most production in the Gulf of Mexico
Global demand for oil will return to pre-pandemic levels in 2022

The price of crude oil has risen from $37 to $41 in less than a few days and the current price is $40.5. Hurricane Delta has brought most production in the Gulf of Mexico to a standstill, which has had a positive effect on the price of oil.

Fundamental analysis: Global oil demand will return to pre-pandemic levels in 2022

After the news that Hurricane Delta has shut down most of the production in the Gulf of Mexico, the price of crude oil is again above the psychological limit of 40 dollars. Last week was very bullish for oil prices, despite the fact that OPEC has announced that global oil demand in 2022 will return to pre-pandemic levels.

Demand for oil has weakened as air traffic is still restricted and some reports suggest that global flights have fallen 26% from last year’s level, reducing the need for aviation fuel. The aviation industry needs support and it seems that something will be done to ensure that this happens.

Pandemic restrictions also reduce fuel consumption, and it is important to note that India’s oil imports fell 23% to 15.2 million barrels per day in August. The Organization of Petroleum Exporting Countries agreed that the production cuts will remain in place until December and this will ultimately drive the market in the coming period.

Nevertheless, 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: Crude oil price is back above the psychological level of USD 40

Crude oil again rose above the psychological level of $40, but investors who trade in oil should be cautious in the coming days.

Data source: tradingview.com

On this diagram I have marked important resistance and support levels. The important support levels are $35 and $30, $45 and $50 represent the resistance levels.

If the price jumps above $45 it would be a “buy” signal and we have the open path to $50. A rise above $50 supports the continuation of the uptrend and the next price target could be around $55.

If the price on the other side falls below the $35 level, this would be a “sell” signal and we have the open path to $30.

Summary

After the news that Hurricane Delta has shut down most of the production in the Gulf of Mexico, the price of crude oil is again above the psychological limit of 40 dollars. The coronavirus crisis has reduced global demand for oil and OPEC has decided to limit production until December. The COVID 19 cases in the USA continue to increase, while Europe is not doing any better with this pandemic. This is certainly not good for the economy and crude oil prices will be linked to the global economic outlook.

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