By Adedapo Adesanya
The oil market witnessed a drop in the major benchmark prices despite the Energy Information Administration (EIA) reporting an inventory drop of 3.8 million barrels for the week to October 9.
The international benchmark futures, Brent crude, fell by 0.65 per cent or 28 cents to trade at $43.04 per barrel while the US benchmark, West Texas Intermediate (WTI) crude futures, dropped 0.19 per cent or 8 cents to trade at $40.96 per barrel.
The market had initially jumped over the news that the US crude inventories fell by 3.8 million barrels for the week ended October 9, according to the data, which was delayed by a day because of Monday’s US federal holiday. It followed a 500,000-barrel increase in the previous week.
Market analysts had forecast a weekly decline of 2.3 million barrels, while the American Petroleum Institute (API) reported a decrease of 5.4 million barrels. a decline in crude inventories usually lift prices.
Prices could not hold down the trend as concerns over a further slowdown in energy demand emerged with rising COVID-19 infections, leading to renewed restrictions on movement in several European countries.
In London, households have been banned from mixing indoors with other households beginning Saturday, joining a number of European cities that have tightened restrictions in an effort to contain a resurgence of the spread of COVID-19. Germany has put new limits on gatherings, while nighttime curfews are being implemented in nine French cities.
With increasing restrictions being imposed across Europe and possibly expanding in coming days, the demand picture is not looking great.
Oil was positive on Wednesday after Saudi Arabia’s Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, in a phone call, agreed on the importance of all oil-producing countries to continue cooperating and abiding by a supply cut agreement to achieve a goal that will benefit both producers and consumers.
Secretary-General of the Organisation of the Petroleum Exporting Countries (OPEC), Mr Mohammad Barkindo, on Thursday echoed that message, saying that the organisation and its allies, OPEC+, would move to ensure oil prices don’t fall sharply when it meets late next month.
The Joint OPEC-Non-OPEC Ministerial Monitoring Committee, or JMMC, which monitors compliance with production cuts, is scheduled to meet on Monday. OPEC+ is scheduled to hold official meetings on November 30 and December 1.
Also dampening the mood of the market is Libya, which continues to ramp up its oil output with the potential of reaching 1.2 million barrels per day at full capacity. It is about half of that currently.
Libya has restarted oil production at the country’s biggest oil field, Sahara, which was shut down due to a force majeure, a legal framework that allows a company to suspend its contracts due to extraordinary circumstances. The field will initially pump 40,000 barrels of crude a day before reaching its capacity of 300,000 barrels next week.
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