Brent Sells at $41 on Demand, Oil Glut Worries

By Adedapo Adesanya

Fears by investors that the rising COVID-19 cases could affect the demand for crude oil at the global market put the prices of the commodity under pressure on Tuesday.

Also, traders worried about a possible rise in the supply of crude oil to the market as Libya prepares to begin production in full after slowing down output since the start of the year.

Yesterday, the Brent, which is the international crude benchmark, dropped 56 cents or 1.34 percent to trade at $41.15 per barrel, while the US West Texas Intermediate crude lost 35 cents or 0.88 percent to settle at $39.35 per barrel.

Fuel demand showed recovery from the worst weeks of the outbreak, but cases have been rising in some major US states, in China and some other places where travellers face quarantine restrictions.

Investors will seek signs of demand recovery in weekly inventory data due early Wednesday from the American Petroleum Institute (API) industry group and from the UA government, Energy Information Administration (EIA) later in the day.

Last week, data from the EIA brought caused panic as US crude oil inventories swelled by 1.4 million barrels, far exceeding analysts’ expectations.

On Tuesday, the market reacted negatively to the news that Libya was trying to resume exports, which have been almost entirely blocked since January due to a civil war in the African nation. The state’s oil company hopes talks will end a blockade by eastern-based forces.

The state-run National Oil Corporation (NOC) said it was in talks with Libya’s UN-recognized government in Tripoli, the US and some Middle Eastern powers to end their blockade of the nation’s oil ports and fields

This might serve a big blow as a resumption in Libyan output would make the job of the Organisation of the Petroleum Countries (OPEC) a little bit more difficult as the decision to expand cut by 9.7 million into July may cause a drawback.

Libya’s exports have plummeted to less than 100,000 barrels a day from 1.1 million because of the shutdowns. The NOC has said that neglect and damage from the conflict, which began in 2011 after the ouster of former leader Muammar Ghaddafi, means it will cost hundreds of millions of dollars to restore output fully.