Oil prices have fallen in recent days due to concerns about dropping demand. This could be a result of mounting coronavirus infections in Europe, which has prompted governments to tighten restrictions and institute lockdowns. Worries about falling demand come at a time when key oil producers are preparing to ramp up supply.
Investors should recognize that the fundamental cause for the rise in oil prices has been the restart of oil demand, driven by an improved COVID-19 scenario due to advances in treatment options and comprehensive vaccination programs.
As a result, any threat to demand would certainly destabilize markets and drive down oil prices. If the newly reported coronavirus cases spread outside Austria, the oil market may see an overstock, causing prices to fall.
While demand is under pressure, nations like the United States and China are working hard to increase output by contemplating tapping strategic reserves and expanding capacity. As a result, both dropping demand and growing supply may result in reduced pricing.
