Oil prices plummet in second wave of COVID-19

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Oil had an eventful year. Crude prices turned negative for the first time in history, followed by one of the largest rallies the industry has ever seen. And now, just when the market starts to seem somewhat stable, COVID-19 strikes again.

The resurgence of COVID cases in the United States and the gloomy economic forecasts of the President of the Federal Reserve, Jerome Powell, are pushing up investors, as oil prices are about to experience their largest daily decline since April 27. Again, oversupply and lack of demand took center stage.

Yesterday, the EIA reported that US oil stocks had increased 5.7 million barrels, defying expectations of construction of 1.45 million barrels. Adding even more pressure to oil prices, the US Federal Reserve noted that unemployment rates should stabilize at nearly 9.3% by the end of the year, adding that it could take years to return to pre-pandemic employment levels.

COVID-19 was primarily responsible for the market collapse. While many states have already reopened with strict guidelines, things don’t seem to be going as planned.

It took the United States almost three months to reach the million confirmed cases, but it only took six weeks to double it. The United States crossed the 2 million mark on Wednesday, with many states reporting significant peaks following attempts to ease lock restrictions.

Related: Watch out for bulls: a dark cloud is forming on the oil markets

This morning, the United States reported more than 113,000 COVID-related deaths, and health experts around the world warn that the pandemic is far from over, encouraging individuals to maintain social distancing and wear masks in public.

Although COVID-19 has wreaked havoc on global economies, some suggest that the oil market, in particular, has simply grown too quickly.

Jeffrey Halley, Senior Market Analyst, Asia Pacific at OANDA, said, “Falling oil prices are as much a matter of timing as the COVID-19 cases, as stocks and oil seemed overbought for any measure. short-term indicator, “Adding,” Some sort of correction was expected since the massive increase in long-term speculative positioning and the breathtaking oil rally in the past month. ”

By Charles Kennedy for Oilprice.com

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