The speed of the returning lockdowns now does resemble a wave, and that is essentially the second wave of the Covid-19 pandemic.

Country after country, the world is re-imposing now strict lockdown measures to try to reduce the increasingly worrying infection numbers.

The pandemic’s daily infection count has in many places already become higher than even the first wave, sending a chilling message to governments and policymakers.

Naturally, the number of lockdowns and the oil demand the countries that imposed them account for, will lead to some demand destruction, depressing balances and putting a further strain to the already fragile market.

After a weekend of lockdown announcements and grim projections, oil prices couldn’t do anything else but jump of the cliff to lower levels on Monday.

It is not just bearish traders sweating over what’s coming, it’s a very logical price move. The pandemic’s second wave was a development largely ignored in market pricing during summer and now the pandemic returned with a bang.

Oil prices sunk to a five-month low and if we need to name countries responsible for this today, we would make a long list of Covid-19 hit nations.

Most of the shock of course came from Europe, where the situation seems to have worsened much quicker than anyone expected. Governments thought they had the Covid menace under control but the virus returned with a vengeance.

The streak of bearish news is not expected to end just yet, as new lockdown measures in more countries across the globe seem inescapable.

Governments are eager to get the virus back on control ahead of the Christmas season and this will again take sacrifices, including ‘oily’ ones. Transport will definitely take a hit and lose some of its recovered oil demand volumes.

With widespread protest in Spain and Italy in face of possible lockdown measures, and tensions rising in the United States ahead of this week’s presidential elections, this might well have been one of the spookiest Halloween that the markets have experienced in a while.

Meanwhile, the supply side of the equation doesn’t seem to have gotten the latest developments from the demand side.

In addition to Libya’s ramp-up, Canada's supply is set to rise as the government of Alberta plans to end mandated production curbs in December. Norway’s oil production is also set to increase as the Johan Sverdrup field ramps up production.

The oil balances are getting a beating, with slaps landing from both demand and supply. As things are at the moment, it will be difficult for oil prices to climb back to 40+ dollar levels anytime soon, unless something radical happens on the supply side.

OPEC+ is known for such radical interventions, but so far has avoided to address the second wave of the pandemic with actions. In the next meeting though, it is highly unlikely that the latest developments will be ignored. It’s just too much to burden for the market.