By Adedapo Adesanya
Oil futures declined by more than 3 per cent on Monday, sending prices to their lowest level in three weeks as COVID-19 cases continue to surge raising alarm over demand for crude.
The international benchmark futures, Brent crude took a 3.16 per cent or $1.32 hit to trade at $40.45 per barrel while the US benchmark West Texas Intermediate (WTI) crude futures slid by 3.24 per cent or $1.29 to trade at $38.56 per barrel.
The United States saw its highest number of new COVID-19 cases on Friday and Saturday, with hospitalisations also rising to hit two-month high and deaths are trending upwards.
France registered a record rise in coronavirus infections on Sunday as the second wave of cases surges through Europe. Italy and Spain imposed fresh restrictions to curb the virus.
The relentless second wave of coronavirus cases across Europe and the US has stopped oil demand recovery in its tracks, and with a fresh prospect of increased supply, prices will further edge down.
Adding to the negative environment was the truce in Libya, which has increased oil supply to the market, further threatening the commodity’s faltering recovery.
Business Post reported that Libya’s main warring factions signed a permanent truce last week, a month after a blockade on the country’s oil exports by one faction in the country’s six-year-long civil war was lifted.
Libya’s National Oil Corporation on Friday lifted force majeure on exports from two key ports, Es Sider and Ras Lanuf, announcing that output would increase from a current 500,000 barrels per day to 800,000 in two weeks’ time, and to 1 million barrels per day a month from now, which are much higher than analysts’ estimates.
This could complicate efforts by the Organization of the Petroleum Exporting Countries (OPEC) to restrict supply to cope with affected demand.
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman said at a conference on Monday that the oil market hasn’t finished seeing the worst-case scenario, despite a strong recovery in recent months. It comes as demand in Asia holds up well, but concerns grow over other parts of the world as the virus spreads.
The Saudi minister who chairs the alliance of OPEC and its allies, OPEC+ with Russia noted that lack of commitment by producers to the group’s cuts could force the market to penalise them.
Russian President Vladimir Putin last week signalled openness to delaying scheduled production hikes by the OPEC+ alliance. The group will decide whether to stick to the current plan at a meeting scheduled for November 30 – December 1.
The alliance’s current plans call for easing production limits by 2 million barrels per day from January 2021 but if markets conditions worsen, they will have no choice but to delay the increase of quotas by a month or two at its meeting.
Modupe Gbadeyanka