Oil Hit 5-Month Low on Glut Supply Concerns Amid COVID-19 Pandemic

The oil market faces an uncertain future as countries resort to stringent measures to combat a second wave of the COVID-19 pandemic. The uncertainty around the U.S election is another development that continues to rattle oil traders in the industry.

Oil Prices Plunge

Oil prices hit a 5-month low early Monday morning amid a surge in worries about global demand. A number of European nations led by Germany and France have already resorted to lockdowns in a bid to curb the spread of the virus. Lockdowns are highly expected to result in a significant decline in oil demand likely to continue piling pressure on oil prices.

Brent crude has already tanked to $35.74 a barrel, a level not seen since May. The likelihood of prices tanking further is high as coronavirus cases continue to increase, conversely increasing the risk of further shutdowns.

Global coronavirus cases surpassed 500,000 last week, with Europe crossing the 10 million levels on total infections. The U.K alone is grappling with more than 20,000 cases of new infections a day as the death toll in the U.S averages 1,000 a day.

U.S Election Outcome Risk

A Joe Biden win at the upcoming U.S presidential election could significantly impact the oil industry. The Democratic presidential runner has already indicated that he could lift sanctions on Iran if they agree to return to full d compliance on the agreement hammered during the President Barack Administration.

A return to diplomacy could result in the lifting of U.S sanctions on Iran’s oil export. Such a move could result in the pumping of more than 2 million barrels of Iranian crude oil exports into the market. While the same won’t happen overnight, it would still be a major a blow to the embattled oil industry that is struggling with a glut in supply.

The last thing that the oil markets need is a glut in supply. Oil prices tanked to record lows early in the year as supply outpaced demand in the aftermath of lockdowns around the world.

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