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Crude Oil Stages Impressive Rebound After Sharp Intraday Drop

November 2, 2020 at 22:24 by Vladimir Vyun

Crude oil logged impressive losses on Monday, driven down by various negative factors. But even more impressive was the rebound staged by the commodity, which allowed it to settle with gains for the first time in four sessions.

Crude started the week extremely weak, slumping about 5% during Monday’s Asian trading session. One of the main reason for the slump was the second lockdown in the European Union. Various European countries were implementing measures to halt the second wave of the COVID-19 pandemic as the number of coronavirus cases was sharply increasing. That led to concerns about the negative impact such measures can have on the region’s economy. Prices for crude are directly tied to economic growth as a slower economic activity means lower consumption of fuel and energy, leading to smaller demand for oil.

Another problem for oil was the sharply increasing oil production in Libya. According to a report from Reuters, the country’s output is currently at about 800,000 barrels per day. That is an increase of over 100,000 in just a few days.

But crude oil got support from reports that Russian oil producers were speaking with the Russian government about a delay of the planned increase of oil production in January. On top of that, the Organization of Petroleum Exporting Countries may also delay its planned reduction of oil output cuts by three months. The OPEC and its allies were planning to lower the production cut targets from 7.7 million bpd to about 5.8 million bpd. But such a move seems ill-timed during the second wave of the coronavirus pandemic.

Futures for delivery of WTI crude oil in December climbed by $1.3 (3.63%) to $37.09 per barrel as of 22:19 GMT on NYMEX today. January contract for Brent crude rallied by $1.24 (3.27%) to $39.18 per barrel on ICE.

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