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The oil port of Brega, Libya. Rising oil supplies in the face of reduced demand saw a weekly drop in oil prices, as market conditions continue to remain volatile due to the ongoing rise of COVID-19 cases. Image Credit: Reuters

Abu Dhabi: Rising oil supplies in the face of reduced demand saw a weekly drop in oil prices, as market conditions continue to remain volatile due to the ongoing rise of COVID-19 cases and its adverse affect on global economies.

Oil prices last week saw Brent closing on $41.77 and West Texas Intermediate (WTI) below the $40 range at $39.85.

“The immediate catalyst for lower prices appears to be market expectation that Libya’s production is going to recover back to pre-civil war levels of more than 1 million barrels per day in the next few weeks, at least according to statements from the country’s National Oil Company,” said Edward Bell, senior director, Market Economics, Emirates NBD.

“Libya is not bound by the OPEC+ deal to cut production and its oil infrastructure, at least the producing assets, have been relatively less affected by the civil war than some of the midstream infrastructure,” he added.

Biden comments on oil send jitters

And with looming US presidential elections set to take place next week, oil markets are keeping a close eye on the winner with each candidate’s energy policies to play a role when it comes to influencing prices.

“Not helping oil were comments from Joe Biden in the last presidential debate where the candidate clumsily said he would transition away from the oil industry,” said Bell.

“That Biden is the ‘greener’ of the two candidates isn’t surprising but so far the Democrat has tried to walk a narrow line to avoid dismissing the oil industry as Hilary Clinton seemingly did on coal companies and workers in 2016,” he added.

“A more immediate threat to oil prices in the near term under a Biden administration would be whether the US chooses to re-enter the JCPOA, the Iran nuclear deal, which would allow Iran to resume oil exports,” Bell said.

Shale oil growth could also see a slowdown under a Biden presidency, which could in turn help to support oil prices according to Ole Hansen, head of commodity strategy, SAXO Bank.

“It is widely expected that a Biden win would see the U.S. join global efforts to reduce emissions through investments in greener energy solutions while at the same time curbing the rise in shale oil production through increased regulations.

“These developments should see crude oil prices – through lower supply growth – supported more by a Biden win than what would otherwise be seen with Trump staying in the White House,” he added.

“The US election result, OPEC+ meeting and COVID-19’s impact on demand are likely to be the main factors determining where Brent crude oil will finish the year within the $38/b to $48/b.”