Oil Losses Deepen, Set For Second Monthly Fall As Virus Spread

SINGAPORE: Global oil prices fell more than 1% on Friday, extending losses and on track for a second monthly fall, on growing concerns that the rise in COVID-19 cases in Europe and the United States could hurt fuel consumption.

Brent crude slipped for a third day and was down 51 cents, 1.4%, at $37.14 a barrel by 0628 GMT after touching a five-month low in the previous session. December Brent contract expires on Friday.

U.S. West Texas Intermediate (WTI) crude declined 48 cents, or 1.3%, to $35.69 a barrel after dipping to its lowest since June on Thursday.

“With a European slowdown jeopardising global consumption and the return of Libyan production, the onus must now fall on OPEC+ to reconsider their 2 million barrel per day production increases in January,” said Jeffrey Halley, senior market analyst, Asia Pacific, OANDA in Singapore.

He added that oil prices are unlikely to sustain any rally in this environment short of a statement from OPEC+.

The Organization of the Petroleum Exporting Countries and their allies including Russia, a group known as OPEC+, are expected to raise their output by 2 million bpd in January as part of their production agreement.

However, top producers Saudi Arabia and Russia are in favour of maintaining the group’s output reduction of about 7.7 million bpd currently into next year as renewed lockdowns in Europe are threatening to cool demand again.

Global coronavirus cases rose by a single-day record of half a million on Wednesday prompting governments across Europe to impose mobility restrictions again to curb the spread.

While that has reduced mobility and fuel consumption within Europe, demand in the United States is holding up for now, RBC Capital’s Mike Tran said in a note.

“Global mobility is becoming increasingly polarized across regions this week,” he said.

“Discretionary activity in Europe is slowing, while both driving and flying in the U.S. continue to register at the highest levels since the pandemic began.”

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