The oil price has taken another hit in today’s trading session as Concerns about the reintroduction of coronavirus lockdowns in places such as Australia and the United States, threaten to cause a sharp reduction in demand as happened when the virus first struck, and caused the price to plunge below zero.

The price is now sitting below the psychological level of $40 a barrel on the back of near-record high stockpiles and a surge in coronavirus cases. In the US, California, Texas and Florida recorded their biggest daily increases in infections while the number of deaths was also alarming. The situation threatens to set off a round of panic selling as we saw in April.

“There’s an overall malaise in the market right now, which has come with the realization that we might be stuck in this for a lot longer than we anticipated,” said Tariq Zahir, managing member of the global macro program at the New York-based Tyche Capital Advisors LLC.

“When you have negative economic news, along with more negative coronavirus news, everything will be down, and you’ll see sell-offs like we saw today.” he added.

Another factor that may weigh on the oil price is the restarting of oil refineries in Libya which have been closed since January due to regional tensions and the country's civil war. The new oil supply about to hit the market comes at a time when extra supplies is not needed and may once again lead to an oversupply.

“The global market is going to have a difficult time absorbing these additional Libyan barrels,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund.

“At the same time, there is going to be “tens of thousands of layoffs of folks who are going to be out of work and not driving. All of a sudden there’s a real focus on the potential for the bottom to drop out for oil demand here.” he added.