The price of oil plummets as COVID-19 cases increase in the USA and Europe.

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Crude oil remains near multi-month lows at $35.7
The number of active oil platforms in the USA rose by 10 to 221
Bears keep control of the price action, and if the price falls below $35, this would be a strong sell signal

The price of crude oil has dropped from $39.8 this trading week to below $35, and the current price is $35.7. Baker Hughes reported the sixth weekly rise in U.S. oil rigs in a row, and the price is also under pressure from growing fears that new restrictive measures could significantly reduce demand for oil.

Fundamental analysis: New restrictive measures could significantly reduce demand for oil

Crude oil weakened below $35 on Thursday due to growing fears that new restrictive measures could significantly reduce demand for oil. The coronavirus crisis has already reduced global demand for oil, and OPEC has decided to limit production until December.

It is also important to note that Baker Hughes reported that the number of active oil platforms in the United States has increased by 10 to 221, adding to concerns about oversupply. Demand for oil has also weakened as air traffic is still restricted, and some reports indicate that global flights were 26% lower than last year.

COVID-19 cases in the United States 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.

Russia and Saudi Arabia had the idea of extending the current production cuts of 7.7 million barrels per day to next year, but producers are divided on this. The oil price has gone into a “bear market”, although analysts remain “bullish” on oil and most of them expect oil prices to rise in the coming months.

The attention of investors is also currently focused on the negotiations on the US economic stimulus package and the upcoming presidential elections. The U.S. presidential elections will be held on November 3, and according to the polls, U.S. President Trump’s rival, Joe Biden, is leading.

Technical analysis: Bears keep control of the price action
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 $50 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 $50 supports the continuation of the uptrend and the next price target could be around $55.

On the other hand, if the price drops below $35, this would be a “sell” signal and we have the open path to $30.

Summary

The price of crude oil weakened by 10% each week as the release of data from the Baker Hughes oil platforms did not provide support. Baker Hughes reported the sixth weekly rise in U.S. oil rigs in a row, and the price is also under pressure from growing fears that new restrictive measures could significantly reduce demand for oil. The bears are keeping control of the price action, and if the price falls below $35 again, it would be a strong “sell” signal.

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