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Oil Extend Selloff, Rising Virus Cases Underline Demand Fears

Oil futures fell sharply on Thursday, extending this week’s slide as rising COVID-19 cases sparked tighter restrictions on activity in Europe and underlined worries about the outlook for the U.S. and global economic recovery.

West Texas Intermediate crude for December delivery fell $1.49, or 4%, to $35.90 a barrel on the New York Mercantile Exchange, while December Brent crude, the global benchmark, was off $1.47, or 3.7%, at $38.15 a barrel on ICE Futures Europe.

Clearly this latest wave of COVID-19 will weigh somewhat on oil demand, and with ICE Brent now trading just below $40 [a barrel], OPEC+ will likely be under pressure to take action when they meet at the end of November,” said Warren Patterson, head of commodities strategy at ING, in a note.

For now, that means the OPEC+ alliance is likely to roll over existing output cuts into 2021, forgoing a relaxation of curbs scheduled for January, he said, a move that would also help offset the surge in production by Libya.

However the U.S. presidential election remains a wild card, with a potential victory by Democratic challenger Joe Biden over President Donald Trump opening the way to a return to the Iranian nuclear deal and the lifting of sanctions that could bring between 1.5 million to 2 million barrels a day of oil supply back on to the market, he said.

Oil fell sharply Thursday as France and Germany imposed tighter restrictions in response to the rising number of COVID-19 cases. The U.S. reported 79,000 new cases on Wednesday, the second day in a row that the figure topped 70,000, as several states reported a jump in infections, according to The Wall Street Journal.

Oil traders looked past the production disruptions caused by Hurricane Zeta, which made landfall in Louisiana Wednesday as a Category 2 storm. The Bureau of Safety and Environmental Enforcement on Wednesday night estimated that two-thirds of oil production in the Gulf of Mexico had been shut-in by the storm, along with around 44.5% of natural gas production.

January natural gas was down 1.6% at $3.355 per million British thermal units.

Source: Marketwatch