During Monday’s Asian trading session, the WTI Crude Oil prices failed to stop their declining streak of Friday, remaining depressed under the $ 40.00 level, mainly due to the latest reports suggesting that the US producers have begun to restore their output, now that Hurricane Delta has weakened. This has raised fears of oversupply, undermining the crude oil prices. Across the pond, the strike that was affecting Norway’s oil production has come to an end, adding further pressure to the crude oil prices.
Thus, the major factor behind the heavy fall in crude oil prices could be the restoration of output in Norway and the US. Apart from this, the resurgence of the coronavirus is leading to further lockdown restrictions on activities, which has also exerted downside pressure on the crude oil prices. Meanwhile, the fresh strength of the broad-based US dollar, backed by the stalled stimulus talks, has also played a role in undermining oil prices, as the price of oil is inversely related to the price of the US dollar. At the moment, crude oil is trading at $ 40.27 and consolidating between 39.84 and 40.52.
As per the latest report, the long-running strike in Norway ended on Friday, after oil firms reached a wage agreement with labor union officials. This, in turn, undermined the crude oil prices. It is worth recalling that the 10-day strike had threatened to cut Norwegian oil and gas output by around 25%.
Apart from this, the losses in the crude oil prices were further bolstered when US oil production resumed after Hurricane Delta weakened. It should be noted that Hurricane Delta was downgraded to a post-tropical cyclone on Sunday, after delivering the greatest impact on the area’s energy production in 15 years. As per the latest report, the workers had returned to production platforms by Sunday, with Total S.A. (NYSE: TOT) resuming production to the tune of 225,500 barrels at its Port Arthur facility in Texas.
However, the worries over the COVID-19 pandemic remain on the cards, as the number of cases in the UK and Europe is still not showing any sign of slowing down. As per the latest report, France has reported a record 27K new cases, and the number of infections in Germany has made its biggest jump since April. Spain has also been hard-hit by the pandemic of late. As a result of the rampant virus, the local lockdowns are set to get tough for Northern England. All of this negative news continues to fuel concerns over the global economic recovery, which in turn is keeping the oil prices under pressure.
Elsewhere, according to reports, the US House Speaker Pelosi has turned down Friday’s proposal by US President Donald Trump, concerning the coronavirus (COVID-19) aid package of almost $ 1.8 trillion. This, in turn, has dashed the expectations of further stimulus from the US government.
As a result, the broad-based US dollar succeeded in stopping the losses of the previous-session, taking fresh bids on the day. However, the gains in the US dollar could be short-lived or temporary, due to the worries that the economic recovery in the US could grind to a halt, because of the resurgence of coronavirus cases in the US, coupled with post-election uncertainty, which could be bad for both the US and the global economy. The gains in the US dollar are keeping the oil prices under pressure, as the price of oil is negatively correlated to the price of the US dollar. Meanwhile, by 9:43 AM ET (1:43 AM GMT), the US Dollar Index, which tracks the greenback against a basket of other currencies, had risen by 0.10%, to 93.108. The market sentiment is expected to remain under pressure, due to the US holiday. Good luck!