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Oil prices slump on coronavirus lockdown concerns

Fears mount on US election, weakening demand and rising supplies

Brent fell as much as 5.8 per cent and WTI as much as 6 per cent in early trade, hitting their lowest since May

Mon Nov 2 2020 - 15:11

Oil prices fell on Monday on worries that widening coronavirus lockdowns in Europe would weaken fuel demand while concerns remain over potential turbulence resulting from this week’s US presidential election.

Brent crude was down 13 US cents, or 0.3 per cent, at $37.81 a barrel by 2:45pm. US West Texas Intermediate fell 16 cents, or 0.4 per cent, to $35.63.

Both contracts fell more than $2 earlier in the session.

Countries across Europe have reimposed lockdown measures to try to slow Covid-19 infection rates that have accelerated over the past month.

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“The number of lockdowns – and the oil demand the countries that imposed them account for – will lead to some demand destruction, depressing balances and putting further strain on the already fragile market,” said Rystad Energy analyst Paola Rodriguez-Masiu.

Global oil trading companies expect further demand destruction, though estimates differ.

Oil pared some losses after Japan’s export orders grew for the first time in two years and China’s factory activity rose to its highest in nearly a decade in October. Sharply rising Libyan oil production also added to price pressures. Libya’s output stands at about 800,000 bpd, up more than 100,000 bpd from a few days ago, a Libyan source told Reuters on Saturday.

Meanwhile, output from the Organization of the Petroleum Exporting Countries (Opec) rose for a fourth month in October, a Reuters survey found.

Opec and allies including Russia are cutting output by about 7.7 million bpd to support prices.

This Opec+ group is scheduled to hold a policy meeting on November 30th and December 1st, with some analysts expecting a postponement of plans to ramp up output by two million barrels per day from January.

“A resolute and coordinated announcement and action by OPEC+ are what is really needed to prevent any further price slide,” said Commerzbank analyst Eugen Weinberg. – Reuters

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