Oil prices fell by more than 4% on Thursday, hitting a five-month low and extending Wednesday’s steep decline over fears that re-imposed coronavirus lockdowns could hurt oil demand.
December Brent crude futures slipped $1.66 or 4.2% to $37.45 a barrel by 05:34 West Africa Time, having dropped to as low as $36.64, its lowest in five months. The more active January contract shed 4% at $38.02 a barrel.
U.S. West Texas Intermediate crude futures sank by $1.50 or 4%, lower at $35.89 after hitting its lowest level since mid-June at $34.92.
Both contracts slumped by over 5% on Wednesday.
“People are reacting to COVID cases that are spiking – they are reacting to the number of new cases,” said Bob Yawger, director of energy futures at Mizuho in New York. The market under further strain about demand fears as additional U.S. economic stimulus has not been forthcoming, Yawger added.
With coronavirus infections escalating across Europe, France will need people to stay at home for all except essential activities beginning from Friday, while Germany will close bars, restaurants and theatres from 2nd November until the end of the month.
“As lockdowns begin to bite on demand concerns across Europe, the near-term outlook for crude starts to deteriorate,” said Stephen Innes, chief global market strategist at Axi.
The Organisation of the Petroleum Exporting Countries (OPEC) and its Russia-led allies will be monitoring the worsening bleak outlook meticulously and building supplies from Libya, an OPEC member.
OPEC and its allies, a cartel known as OPEC+, intend to reduce production cuts in January 2020 from 7.7 million barrels per day (bpd) to around 5.7 million bpd.
“[We] believe it is increasingly unlikely that oil production will be stepped up from January. Instead, OPEC and its allies (OPEC+) would really need to implement further production cuts, given the weak prospects for demand,” Commerzbank said.
Libya is currently producing 680,000 bpd and anticipates output to climb to 1 million bpd in the weeks ahead, a Libyan source said.
OPEC+ will meet on 30th November and 1st December to set policy.
Oil had initially recovered modestly from overnight losses in Asian morning trade on technical support and the possibility of tighter short-term supply as Hurricane Zeta sweeps through Louisiana.