Is November a good month for buying Oil?

Is November a good month for buying Oil?
Written by:
Stanko Iliev
November 8, 2020
  • The global oil demand will return to pre-pandemic levels in 2022
  • COVID-19 cases in the US continue to rise while Europe is not faring any better with this pandemic
  • If the price falls below $35 it would be a "sell" signal and we have the open way to $30

The price of crude oil has advanced above $39 last trading week and the current price stands around $37. Crude oil remains under the pressure by growing fears that new restrictive measures could significantly reduce demand for oil.

Fundamental analysis: There is still no clear trend for oil

Crude oil remains below the $40 psychological level as the OPEC announced that global oil demand will return to pre-pandemic levels in 2022. The coronavirus crisis has already reduced global oil demand and OPEC made a decision to limit production until December.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Demand for oil has also weakened as air travel remains restricted and according to some reports the global flights were down by 26% from year-prior levels. Joe Biden won the presidential election in his birth state of Pennsylvania this Saturday and he become 46th president of the United States.

He has 290 electoral votes which is more than enough to capture the White House and to deny President Trump a second term. This could be positive for the price of oil in the long term and together with optimism over vaccines/treatments should prevent any massive sell-offs.

The attention of investors is also focused on the US stimulus aid package negotiations and on the situation with the COVID-19 pandemic. COVID-19 cases in the US continue to rise while Europe is not faring any better with this pandemic.

The US reported over 100K new cases in one day and the pandemic pushed U.S. hospitals to the brink of capacity. This is certainly not good for the economy and prices of crude oil will be connected with the global economic outlook.

There is still no clear trend for oil prices but analysts stay “bullish” on oil and most of them are expecting an increase in oil prices for the next several months (a slow but steady rising of prices).

Technical analysis: Bears are focused on breaking the support level at $35

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $35 and $30, $40 and  $45 represent the resistance levels. If the price jumps above $40 it would be a signal to buy oil and we have the open way to $45.

Rising above $50 supports the continuation of the bullish trend and the next price target could be located around $55. On the other side, if the price falls below $35 it would be a “sell” signal and we have the open way to $30.

Summary

Crude oil remains under the pressure by growing fears that new restrictive measures could significantly reduce demand for oil. There is still no clear trend for oil prices but analysts stay “bullish” on oil and most of them are expecting an increase in oil prices for the next several months. In the midterm, prices of crude oil will be connected with the global economic recovery and worries over the oil demand. My opinion is that the price of oil can weaken below $35 in November but if the price jumps above $40 it would be a “buy” signal.