Oil Prices Steady but Rising Virus Cases, Oil Supply Weigh

Oil prices were steady on Tuesday in energy commodities. It stabilized after three days of declines over concerns that a resurgence of coronavirus is stifling a recovery in fuel demand. Growing output from Libya adds to plentiful supply.

By 0635 GMT, Brent crude (LCOc1) futures were trading down 4 cents, or 0.1%, at $42.58 a barrel. It was recovering its ground after falling to as low as $42.19 earlier in the session.

After dropping to $40.48 earlier, U.S. West Texas Intermediate (WTI) crude (CLc1) futures rose 1 cent to $40.84 a barrel. 

Coronavirus cases reached 40 million on Monday, according to a tally. A growing second wave in Europe and North America is sparking new clampdowns.

Energy analyst Vandana Hari said, it’s clouds of gloom over the oil market again.

The demand picture was already weak when the supply sentiment took a hit on Monday. Saudi Arabia and Russia avoided signalling if they would reconsider the planned OPEC+ January output boost.

The OPEC+

A meeting on Monday of a ministerial panel of the OPEC+ pledged to support the oil market. Concerns are growing over soaring infections.

For now OPEC+ is sticking with a deal to curb output by 7.7 million barrels bpd through December. Then it will shave the cuts back to 5.8 million bpd in January.

However, the planned output increase from January could be reversed if necessary, sources from producing countries said.

Commonwealth Bank commodities analyst Vivek Dhar wrote they don’t think oil markets are in a position to absorb the percentage of global supply mentioned. That is the around 2%  that OPEC+ are expected to restart from 1 January, 2021.

He said rising output from Libya was adding to oversupply concerns. This output operates outside the OPEC+ pact. 

After armed conflict shut almost all of the country’s output in January, Libya is rapidly ramping up production. 

Its biggest field, Sharara, reopened on Oct.11. Its output is now at around 150,000 bpd, or about half its capacity, two industry sources said.

Meanwhile traders will await crude and product inventory data from the American Petroleum Institute on Tuesday. According to a poll, analysts expect U.S. crude oil and distillate stockpiles to have likely fallen in the latest week.

Rystad Energy oil markets analyst Louise Dickson said, since April they have seen a miraculous recovery in oil demand. It is now at about 92% of pre-pandemic levels. But it’s too early to declare an end to the COVID-19 oil demand destruction era, Dickson added.