By Adedapo Adesanya
Previous gains were erased at the oil market on Friday as major benchmark crudes fell into the bearish territory as demand concerns raised by surging coronavirus cases in the United States and Europe overshadowed the prospect of an extension to current supply cuts.
The Brent crude went south by 78 cents or 1.84 per cent to $41.70 per barrel while the United States’ West Texas Intermediate (WTI) crude fell by 86 cents or 2.12 per cent to close at $39.78 per barrel.
Prices had briefly moved higher at the previous session when the alliance involving oil producers and the Organisation of Petroleum Exporting Countries (OPEC) known as OPEC+ through Russia said it did not rule out extending OPEC+ oil output cuts supported oil prices.
The full OPEC+ meeting will hold on November 30 and December 1 to see if the body will sustain the present level of cuts or possibly turn on more taps.
However, the second wave of the pandemic and the resultant slowdown in the demand recovery have raised the questions of whether the increase is premature.
This resurgence of cases in key international markets depressed prices. Italy and several US states reported record daily increases in infections, while France extended curfews for about two-thirds of its population as the second wave of the COVID-19 pandemic sweeps across Europe. This restriction means no opportunity of movement hence not enough demand for fuel.
The market also reacted negatively to new development in Libya. The North African country on Friday saw its warring factions agree to a permanent ceasefire in all areas of the country.
The deal brokered by the United Nations was signed in Geneva, Switzerland with representatives of both factions, UN-backed Government of National Accord (GNA) and the self-styled Libyan National Army (LNA).
The North African oil producer has been faced with conflict between the GNA and LNA for almost two years. The impact of this has severely felt in the oil sector, especially in 2020. Libya’s oil production had fallen to as low as 70,000 barrels per day from around 1.10 million barrels per day before the blockade.
This agreement means likely to result in the opening of two key oil terminals – Ras Lanuf and Es Sider allowing the country to ramp up production to above 500,000 barrels per day.
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