By Adedapo Adesanya
The major crude benchmarks took a nosedive of more than 3 per cent at the international oil market on Thursday as data showed that production from the Organisation of the Petroleum Exporting Countries (OPEC) and its allies increased in September.
The Brent crude futures fell by 3.48 per cent or $1.42 to trade at $40.88 per barrel while the West Texas Intermediate (WTI) crude futures depreciated by 3.8 per cent or $1.59 to $38.64 per barrel.
OPEC+’s September seaborne exports jumped to 22.84 million barrels per day from the 22.11 million barrels per day exported by the cartel through the sea in August.
For OPEC specifically, its exports rose from 17.53 million barrels per day in August to 18.2 million barrels per day in September.
A Reuters survey showed that OPEC’s production for September was up 160,000 barrels per day from the previous month but still showed that the oil cartel is still in compliance with its planned cuts.
The increase in the production came mostly from Iran and Libya, both of whom are exempted from the production quotas due to various unrest.
The market is interpreting this production increase as a viable threat to any oil market rebalancing especially as worries about rising cases of COVID-19 worldwide continue to feed expectations for a slowdown in energy demand.
Crude oil investors will continue to monitor rising cases and its impact on demand. In Europe, countries have started implementing or planning to reinstitute new social-distance restrictions as COVID-19 cases climb.
According to reports, in Spain, the majority of the country’s regions will limit public service and retail to 50 per cent capacity, while France may introduce new restrictions.
Spain, France and the Netherlands have the highest rate of new cases over the last seven days of the world’s largest countries.
Investors also watched developments among US lawmakers over a possible new round of coronavirus stimulus, which could also provide a potential lift to the energy sector, providing funding to out-of-work Americans and troubled businesses.
Also affecting prices are expectations for more oil from Libya which have continued to weigh on the market following Libya military commander Khalifa Haftar lifting an eight-month blockade on crude exports.
The uptick of production in Libya, which promises to restore 1 million daily barrels in an already oversupplied market, raises additional supply concern especially during this time of weak demand.
Also, the market, which hopes for a coronavirus vaccine, was met with disappointing news as reports show that two separate vaccine trials have resulted in unpleasant side effects, including high fever, body aches, bad headaches, and exhaustion.
Analysts noted that news of working vaccines will be crucial in stabilizing the oil market and would impact the pace of economic recovery.
Dipo Olowookere