Oil prices dropped on Monday in energy commodities extending last week’s losses. Increasing COVID-19 cases in the United States and Europe raised worries about energy demand. Libya’s fast growing production also weighed on prices.
By 0934 GMT, Brent (LCOc1) was down $1.08, or 2.6% at $40.69. U.S. West Texas Intermediate (WTI) fell $1.05, or 2.6% to $38.80. Both contracts declined almost 2.5% last week.
In two days through Saturday, the U.S. reported its highest number yet of new coronavirus cases. France recorded over 50,000 new cases on Sunday while Italy and Spain imposed fresh restrictions to curb the virus.
The rising number of COVID-19 cases not only highlight the risks posed by immediate transport restrictions. They also dampen long-term demand expectations. This was a statement from Commerzbank analyst Eugen Weinberg.
On supply, the National Oil Corp (NOC) of Libya said it had lifted force majeure on the El-Feel oilfield.
The NOC said, in four weeks, Libyan production would reach 1 million barrels per day (bpd). It’s a quicker ramp-up than analysts had forecasted.
Where there are renewed concerns over demand outlook, additional supply is the last thing the market needs now. This was stated by Warren Patterson, ING’s head of commodities strategy.
The Group of Producers including OPEC and Russia
The group of producers including OPEC and Russia or OPEC+ will increase output by 2 million bpd in January 2021. It has cut production by a record amount earlier this year.
OPEC+ must not be careless. It has to address the issue of the extra barrels appearing in the market. Or else, the days of relatively stable oil prices will be numbered, said oil broker PVM’s Tamas Varga.
Russian President Vladimir Putin said last week he may agree to extending reductions on OPEC+ oil production.
Energy companies in the U.S. raised their rig count by five. That is in order to take the total to 287 in the week to Oct. 23, the most since May. This was according to energy services firm Baker Hughes Co. Moreover, the rig count is an indicator of future supply.
Investors still increased their net long positions in U.S. crude futures and options. That was during the week through Oct. 20. This was a statement from the U.S. Commodity Futures Trading Commission on Friday.
In other news, U.S. coal baron Robert Murray, President Donald Trump’s ally died on Sunday at age 80. Murray was a leading industry voice who called global warming a hoax.
He retired on Oct. 19 after 63 years in the coal business. This was shortly after applying for federal benefits to treat his black lung disease.