Oil drops 4% on weak demand outlook and higher OPEC supplies
Reuters
Published Sep 30, 2020 09:59PM ET
Updated Oct 01, 2020 03:21PM ET
By Devika Krishna Kumar
NEW YORK (Reuters) - Oil prices fell about 4% on Thursday as rising coronavirus cases around the world dampened the demand outlook, and a rise in OPEC output last month also pressured prices.
Brent crude (LCOc1) futures fell $1.52, or 3.6%, to $40.78 a barrel by 2:04 p.m. EDT (1804 GMT) after dropping to a low of $39.92. U.S. West Texas Intermediate (WTI) crude (CLc1) futures were down $1.66, or 4.1%, at $38.56 after sliding to a session low of $37.61.
"It has become evident that the virus has not been contained. Infection rates are going up, the global death toll has surpassed the 1 million mark and the world is becoming a gloomy place once again," said PVM Oil analyst Tamas Varga.
In the United States alone the pandemic has infected more than 7.2 million and killed more than 206,000.
Europe's worst COVID-19 hot spot, Madrid, will go into lockdown in coming days and Moscow's mayor ordered employers to send at least 30% of their staff home, as several European countries reported records in new infections.
Standard Chartered (OTC:SCBFF) analysts said they now expect global demand to fall 9.03 million bpd in 2020 and recover by 5.57 million bpd in 2021, leaving the 2021 average slightly below the 2016 average.
"Today's trade is sending off some strong bearish vibes given the selloff across the energy complex that is developing despite a significant lift in risk appetite and weakening U.S. dollar," said Jim Ritterbusch, president of Ritterbusch and Associates.
Increasing oil supply from the Organization of the Petroleum Exporting Countries (OPEC) also weighed on the market, with output in September up 160,000 barrels per day (bpd) from August, a Reuters survey found.
The rise was largely on the back of higher supplies from Libya and Iran, both exempt from an oil supply pact between OPEC and allies led by Russia, a grouping known as OPEC+.
Libya's oil output has risen to 270,000 bpd as the OPEC member ramps up export activity following the easing of a blockade by eastern forces, a Libyan oil source told Reuters on Thursday.
"New Libyan barrels, and reports that Russia has been overproducing, had bulls on their heels earlier in the week. Reports today that Saudi Arabia had increased exports in September by 500,000 bpd seemed to be the final straw," said Bob Yawger, director of energy futures at Mizuho.
OPEC members shipped out 18.2 million bpd in September, up from the 17.53 million bpd exported in August, data from IHS Markit Commodities at Sea showed, with Saudi Arabian exports returning to levels above 6.25 million bpd.
Earlier in the session, prices received some respite from progress in U.S. talks on a stimulus package for the world's biggest economy.
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U.S. President Donald Trump's administration has proposed a new stimulus package worth more than $1.5 trillion.
Earlier, U.S. Treasury Secretary Steven Mnuchin said talks with House Speaker Nancy Pelosi made progress on COVID-19 relief legislation, and the House of Representatives postponed a vote on a $2.2 trillion Democratic coronavirus plan to allow more time to agree a bipartisan deal.
Written By: Reuters
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