Oil prices have dropped again, and speculation is beginning to circulate that another slowdown is looming as several factors compound to create one massive headache for the oil industry and investors. Major oil indices fluctuated within the same range for the greater part of a month before dropping on Thursday.

Over the latter half of June and the early weeks of July, oil prices mostly stayed within the same range of $2-3, with WTI struggling to break $41 and Brent mainly staying within or just under the $43 range. The cycle was broken when oil prices entered freefall on Thursday. West Texas Intermediate (USO  ) fell from $40.85 in the early hours of the morning to $39.28 in the evening, dropping below $40 once again. Brent Crude (BNO  ) plummeted to $42.08 from $43.36.

The recovery of the oil industry seemed to hit its ceiling, primarily due to once-again decreasing demand. Oil inventories had begun to shrink after months of rapid accumulation up until late June when a sudden spike of coronavirus infections began to sweep the country. The reason for the spike infections was the opening of many states too quickly, against the advice of medical experts. The sudden surge of infections has generated a great deal of uncertainty over whether or not demand will hold or once again slip. There is enough uncertainty that the Energy Information Administration revised its forecasted gasoline consumption for 2020, estimating that gasoline consumption will decline by 2.1 billion barrels in comparison to 2019.

To make matters worse, it would appear that oil inventories are still building despite production cuts. Where analysts had predicted a shrinkage of 3.1 million barrels for the week of June 3, the Energy Information Administration reported that domestic inventory actually grew by 5.7 million barrels.

The inability of WTI and Brent to break out of their price loop can be attributed to worries concerning demand and the EIA's report of an increase to an already oversaturated market. Thursday's sudden drop, however, was prompted by an entirely different concern regarding the potential for a new source for inventory saturation.

Messla Oil Field and Sarir Refinery in Libya returned to production on Thursday after downtime due to technical issues. Oil production in Libya has been spotty due to the ongoing civil war between the forces of the internationally recognized government and the Libyan National Army, which was repelled from the capital of Tripoli after a failure to capture the city. The fighting between the LNA and government forces wrought havoc on Libya's oil industry, drastically reducing production. Because of the war, however, Libya was made immune to production cuts set out by OPEC. While Libya is far from returning to pre-war production, a new source of oil production still poses a threat to the delicate balance of a market struggling to offload the product it is already burdened with.

Despite a rough few weeks and uncertainty about the future, there is some relief for the oil industry. Despite the concerns over demand fluctuations, gasoline demand, at least for the moment, still seems to be holding out. Consumption compared to previous years remains down, obviously, but in states where the pandemic has slowed down, demand is improving, which could help drain gasoline inventories and ease the saturated market.

More significant relief will likely come with the introduction of a coronavirus vaccine next year or a substantial decline in infection numbers later this year. However, the latter is dependent on states being able to get infection rates under control and prevent another resurgence.