Worries over COVID-19 resurgences push oil prices below $40

Worries about an escalating case of the coronavirus, which United States President Donald Trump just tested positive for, and breakdown of talks among negotiators of a U.S. stimulus package forced oil prices to drop on Friday.

Brent crude futures slid by 1.74 per cent or 4.25 per cent to $39.19 per barrel at 11:34 West Africa Time just as U.S. West Texas Intermediate (WTI) crude futures lost 1.69 per cent or 4.36 per cent to $37.03.

Bonny Light, Nigeria’s premium oil grade, eased by $1.64 or 4.04 per cent to $38.94 on Thursday. But Qua Iboe, another key national oil grade, bucked the general losing trend in the market that same day as it climbed by $1.36 or 3.38 per cent to $41.54.

Brent and WTI are on track for declines of 5 per cent and 6 per cent in that order this week for a second straight week of depreciation.

“It was a weak market already and this event has come along and added uncertainty, giving pause for people to say, ‘you know what, I’m taking some risk off the table’,” Lachlan Shaw, commodity research lead at National Australia Bank in Melbourne.

Oil output from the Organisation of the Petroleum Exporting Countries (OPEC) swelled by 160,000 barrels per day (bpd) in the month that just went by from the preceding month, a Reuter’s survey revealed.

The upsurge derived from bigger supplies from Libya and Iran, both OPEC members excused from an output agreement between the organisation and its Russia-led allies, a cartel known as OPEC+.

Production in Libya has climbed well beyond analysts’ forecast following the lifting of a blockade by the Libyan National Army. The North African nation’s oil supply has lifted to 270,000 bpd as it intensifies export efforts, a Libyan source told Reuters on Thursday.

At 34 million, global pandemic cases are 2 million larger than at the end of last week according to Reuter’s tallies.

A grievous history was made this week when deaths reached the one million mark and many nations are firming up restrictions and mulling lockdowns as infections surge, raising fears about the implications for demand recovery.

Jeffrey Halley, senior market analyst at OANDA, said “oil’s upside was always likely to be limited as fears rise about the global consumption picture and rising OPEC+ production.”