By Adedapo Adesanya
Crude futures plunged more than five per cent on Tuesday sending prices to their lowest in three weeks as COVID-19 cases continue to surge with governments in Europe reintroducing lockdowns, which have put immense pressure on demand for crude.
The United States, Russia, France and other countries have registered record numbers of COVID-19 cases in recent days and European governments have introduced new curbs to try to rein in the fast-growing outbreaks.
French President Emmanuel Macron and German Chancellor Angela Merkel ordered their countries back into lockdown on Wednesday as a massive second wave of coronavirus infections threatens the continent.
The oil market took the nosedive in response to the news that Europe’s biggest economies were imposing nationwide restrictions almost as severe as the ones that drove the global economy this year into its deepest recession in generations.
Consequently, the international benchmark futures, Brent crude, took a 5.24 per cent or $2.16 hit to trade at $39.06 per barrel while the US benchmark West Texas Intermediate (WTI) crude futures slid by 5.71 per cent or $2.26 to trade at $37.31 per barrel.
In the United States, a new wave of infections has been setting records with six days to go until Election Day.
The latest figures from the World Health Organization (WHO) showed that Europe reported 1.3 million new cases in the past seven days, nearly half the 2.9 million reported worldwide, with over 11,700 deaths, a 37 per cent jump over the previous week.
Globally, there are more than 42 million cases and more than 1.1 million deaths have been recorded worldwide from the virus that was discovered in Wuhan, China late last year.
Oil prices had another pressure yesterday from the US crude stockpiles, which rose more than expected last week as production surged in a record build, according to the US Energy Information Administration.
Crude inventories rose by 4.3 million barrels in the week to October 23 to 492.4 million barrels, much more than analysts’ expectations of 1.2 million-barrel rise.
Production surged to its highest since July at 11.1 million barrels per day in a record weekly increase of 1.2 million barrels per day. Some of that was due to offshore facilities coming back online after Hurricane Delta.
The day couldn’t get any worse as prospects for the commodity because the possibility of a deal on new US stimulus appears to be fading away. This was due to the fact that President Donald Trump said a coronavirus economic relief package was unlikely until after next Tuesday’s election.
Meanwhile, market participants are wary of increasing oil output from Libya. Its production is expected to rebound to 1 million barrels per day in the coming weeks.
Modupe Gbadeyanka