Oil price fell to a 5-month low on Monday morning over fears of another Covid-recession.
Brent crude slid by 4% this morning to $36.41 per barrel whilst US crude slumped by over 4.5% as more country’s go into lockdown.
The price of Brent crude is down 45% this year.
“Covid-19 cases continue to break records in the US in election week, with its impact only muted by the fact that 90 million Americans have voted early, including the President,” explained Jeffrey Halley from OANDA.
“Europe continues to be of deep concern, with Britain announcing its new national lockdown lite Saturday, and by my count, Belgium, Greece, Austria and Portugal all joining them to varying degrees. The jury is still out on whether the have-your-cake-and-eat-it approach will work. The downstream effects on consumption though have manifest themselves most obviously on oil.”
“Oil prices were stretchered off at the Asian open today, and are still receiving treatment on the side-lines.”
Energy companies have been hit hard this year, with both BP and Shell cutting thousands of jobs. BP is axing 10,000 jobs in an attempt to save costs amid slumping demand, whilst Shell will cut between 7,000 to 9,000 jobs.
Stephen Innes, Chief Global Market Strategist at Axi, said: “Traders had priced the initial downward adjustments to European road fuel demand.
“I suspect their initial Eurozone 2nd wave forecast was too optimistic after France intensified the lockdown measure, forcing analysts to quickly downgrade their Q4 economic outlooks, which likely intensified the selling pressure.
“OPEC+ manages the supply-side to ensure a March rollover repeat in November remains unlikely.
“Nonetheless, traders appear to be setting up for a re-run of the associated price collapse we saw then, as uncertainty around the end of the month OPEC meeting has the oil complex hedging that it might be too premature for OPEC+ to make adjustments at this stage.”