Oil extends losses with 5% slump on renewed lockdowns

OPEC and allies will be monitoring deteriorating demand outlook closely

LONDON:

Oil prices fell 5% on Thursday to their lowest since mid-June, extending the previous day’s sharp decline on the potential impact renewed coronavirus lockdowns will have on oil demand.

December Brent crude LCOc1 futures were down $1.96, or 5%, at $37.16 by 1233 GMT. The more active January contract lost $1.89 a barrel to $37.75.

US West Texas Intermediate (WTI) crude CLc1 futures fell $1.94, or 5.2%, to $35.45.

Both contracts plunged by more than 5% on Wednesday.

With Covid-19 cases surging across Europe, France will require people to stay at home for all but essential activities from Friday, while Germany will shut bars, restaurants and theatres from November 2 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 allies will be monitoring the deteriorating demand outlook closely as well as rising supplies from OPEC member Libya.

OPEC and its allies, together known as OPEC+, plan on tapering production cuts in January 2021 from a current 7.7 million barrels per day (bpd) to about 5.7 million bpd.

“[We] believe it is increasingly unlikely that oil production will be stepped up from January,” Commerzbank said. “Instead, OPEC and its allies (OPEC+) would really need to implement further production cuts, given the weak prospects for demand.”

Libya is currently producing 680,000 bpd and expects production to rise to 1 million bpd in the next few weeks, a Libyan oil source said.

OPEC+ is scheduled to meet on November 30 and December 1 to set policy.

Oil had initially rebounded slightly from overnight losses in Asian morning trade on technical support and the prospect of tighter short-term supply as Hurricane Zeta slams Louisiana.

But the hurricane is forecast to weaken by Thursday morning in the United States and the return of US production will add to existing oversupply.