Oil drops on Monday, multiple factors to watch
Oil prices started a new week with significant declines. WTI trades over 3% lower after dropping as much as 6% during the Asian trading hours. What has caused declines on the oil market? It would be hard to point to one single reason. Mix of different factors played a role and encouraged investors to limit long positions. Key factors to watch for oil:
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Demand weakened rising concerns that an oversupply may return to the markets in the final quarter of 2020
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New lockdowns pose a threat to demand
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Oil production in Libya is rebounding. Production in the country may reach 1 million barrels per day soon
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Rising odds of Biden win. Joe Biden proposed some negative policies for the oil sector, that are aimed at accelerating green shift
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Biden win also means higher probability of the US economy going into lockdown
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Off-shore storage capacity is running out, hinting that there is little demand for physical commodity
Oil is continuing a pullback. Investors have reduced the number of open long positions recently. However, it should be noted that massive position reduction took place in January and February and oil prices held steady near $50. Another big reduction in the nearby future could provide fuel for another drop. Price is testing 38.2% retracement at press time. Source: xStation5
