Oil Tumbles on COVID-19 Induced Demand Worries

oil weak dollar

By Adedapo Adesanya

Oil futures slipped on Friday as rising COVID-19 cases in the United States and Europe heightened worries about demand for crude.

The Brent crude went down by 35 cents or 0.81 per cent to $42.81 per barrel while the West Texas Intermediate (WTI) crude fell by 8 cents or 0.2 per cent to close at $40.88 per barrel.

However, despite this outcome, prices of the commodity recorded a weekly gain, partly due to assurances from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ that it remains committed to production cuts.

Months after authorities flattened the curve of coronavirus infections across Europe by imposing tough restrictions, the virus has crept back onto the continent. Hospitals are filling up. Bars and cafes are closing down as the continent fights to contain a second wave of the coronavirus.

It has overtaken the US in a key metric that tracks the virus’s spread. Countries including France, Spain, the Netherlands, Belgium and the United Kingdom reported new daily infections in excess of 250 per million people a day which is higher than what the US reported during its peak period in July.

Concerns that this global rise in cases will spur further economic shutdowns that lead to lower energy demand put pressure on prices.

At the previous session, support had come from a bigger-then-expected weekly fall in US crude supplies and fresh signs of OPEC+’s commitment to production cuts.

Business Post had reported that the market found support after Saudi Arabia and Russia reportedly reiterated their commitment to the OPEC+ production cut agreement.

The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) which monitors compliance with production cuts, is scheduled to meet on Monday.

Increasing supply is also weighing on the market as Libya slowly to mount production after the reopening of facilities last month that had been shut down since January due to a blockade related to the civil war. Current output has climbed to around 500,000 barrels per day.

In the US, data released Friday revealed that industrial production fell for the first time in five months, down 0.6 per cent in September, beating growth expectations.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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