Oil prices fall 3% as coronavirus infections raise demand concerns

Marco Green
October 28, 2020

Oil extended last week's losses on Monday, falling almost 2% as a surge in COVID-19 infections in the United States and Europe prompted concern over crude demand, while the prospect of increased supply also hit sentiment.

USA crude ended last week on a bearish note after Libya lifted force majeure on its Ras Lanuf and Es Sider ports, and the state oil company said output would surpass 1 million barrels a day in four weeks. Prices may have stabilized around $40 a barrel as OPEC and its allies curbed supply, but as the coronavirus surges through Europe once again, the twin safety nets for majors in previous downturns - refining and trading - have come under severe pressure as consumers stay home. US oil was up 13 cents, or 03%, at $38.69 a barrel, after also declining more than 3% on Monday.

The lack of progress in striking an agreement for a U.S. coronavirus relief package added to the general market gloom, although U.S. House of Representatives Speaker Nancy Pelosi said on Monday she was hopeful a deal with the White House can be reached before the November 3 elections.

Over the weekend the world's largest economy reported its highest number of new COVID-19 infections in two days while France, the European Union second-largest economy posted new COVID-19 cases of around 50,000 yesterday underlining the intensity of the outbreak.

"It's a dark Monday in the oil market", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

On the supply side, Libya's National Oil Corp on Friday ended its force majeure on exports from two key ports and said production would reach 1 million barrels per day (bpd) in four weeks, a quicker ramp-up than many analysts had predicted.

Meanwhile, the U.S. Gulf Coast energy sector prepared for another storm. That could complicate efforts by the Organization of the Petroleum Exporting Countries to restrict supply to cope with lackluster demand.

But that contradicted an earlier remark from OPEC's secretary general, who said any oil market recovery may take longer than hoped as coronavirus infections rise around the world.

OPEC+, a grouping of producers including the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation, is also set to increase output by 2 million bpd in January 2021 after cutting production by a record amount earlier this year.

Other reports by Click Lancashire

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