Oil falls second day as rising virus cases spur demand worries
Oil prices fell for a second day on Wednesday, extending large losses from the previous as rising coronavirus cases heading into the northern winter prompted concerns about further restrictions on activity that could curb fuel demand.
Brent crude LCOc1 for November delivery dropped 40 cents, or 1%, to $40.63 per barrel by 0635 GMT. West Texas Intermediate CLc1 fell 32 cents, or 0.8%, to $38.97.
The November Brent contract expires today, to be replaced by the December contract, which was down around 0.7% at $41.25.
The benchmarks fell more than 3% on Tuesday as global COVID-19 cases passed 1 million, having doubled in three months.
“The increasing number of COVID-19 cases continues to raise alarm bells on energy demand,” said Avtar Sandu, senior commodities manager at Phillip Futures.
ING Economics also pointed out in a note: “Whilst demand is an issue for the market, the supply side of the equation is not helping either.”
Libya’s Sarir oilfield, which was producing more than 300,000 barrels per day (bpd) last year, restarted output after eastern forces lifted an eight-month blockade on energy facilities.
A threat to supply emerged in Norway on Wednesday, with oil workers organised by the Lederne labour union planning to strike following a breakdown in wage talks. Oil major Equinor EQNR.OL said, however, it will seek to maintain output at the Johan Sverdrup oilfield.
CEOs of the world’s biggest trading companies are forecasting a weak recovery for oil demand and little movement in prices in the coming months and potentially years.
Weighing heavily on markets is the continued depressed demand for jet fuel, with air travel in the doldrums due to coronavirus restrictions and a general disinclination to travel.
Refineries have been trying to find ways to blend their product but an oversupply remains and some plants will be forced to shut down.
Marathon Petroleum Corp MPC.N, the largest oil refiner in the United States, started imposing job cuts on Tuesday, according to people familiar with the matter.
To counter the fall in demand, the Organization of the Petroleum Exporting Countries is unlikely to increase oil production as planned from January next year, traders said on Tuesday.
The market looked past data from the American Petroleum Institute on Tuesday showing U.S. crude oil stocks fell against expectations, focussing instead on the rise in gasoline inventories. [API/S]
Also keeping traders and investors on tenterhooks is the November presidential election, which may remain undetermined on election night, with both candidates contesting the results.
President Donald Trump and Democratic contender Joe Biden ended a chaotic first debate late on Wednesday. Biden, 77, has held a consistent lead over Trump, 74, in national opinion polls, although surveys in the battleground states that will decide the election show a closer contest.