Oil futures slid Monday, under pressure as European countries widened restrictions on activity in an effort to contain a surge in COVID -19 cases that has also hit the U.S., heightening worries over a hit to crude demand.
Nervousness over the U.S. presidential election was also a factor, analysts said, citing fears of an unclear outcome that could spark volatility in financial markets.
West Texas Intermediate crude for December delivery fell 81 cents, or 2.3%, to $34.98 a barrel on the New York Mercantile Exchange, while January Brent crude dropped 64 cents, or 1.7%, to $37.30 a barrel on ICE Futures Europe.
“Oil markets have continued their spiral of decline on Monday morning as Europe prepares for a wider lockdown for November, amplifying fears that demand for oil will decline once again,” said Mihir Kapadia, chief executive of Sun Global Investments. in a note.
England will be the latest European country to move into a second national lockdown, joining France and Germany in taking stricter measures to contain the spread of COVID-19 as the number of cases continue to rise.
The number of daily U.S. cases hit a record late last week, while the seven-day average of new cases in most states remains above the 14-day average, according to a Wall Street Journal analysis of data from Johns Hopkins University, indicating a continued acceleration in the spread of the virus.
Tuesday is Election Day in the U.S. Democratic challenger Joe Biden continues to hold a lead over President Donald Trump in national polls, though the race appeared to tighten in battleground states that could determine the outcome in the electoral college.
Analysts have cited the potential for a contested outcome as a risk factor for markets, potentially triggering a sharp jump in volatility across asset classes.
Oil prices have fallen sharply over the past two weeks, putting pressure on the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — to take action ahead of the planned relaxation of existing output curbs in January.
“If OPEC+ don’t respond soon, the pressure will continue to increase and both Brent and WTI could find themselves closing in on $30 a barrel once again,” said Craig Erlam, senior market analyst at OANDA, in a note.
“The group can only sustain so much and these lockdowns are only going to spread further. It’s not a case of if they’ll push back production increases, it’s now a case of when,” he said.