By Barani Krishnan
Investing.com - The pandemic's grip on oil isn’t easing in any way.
Crude prices tumbled almost 4% on Thursday as the start of the fourth quarter brought to fore new concerns about demand for oil in a season that isn’t particularly great for travel — fall.
Add to that the coronavirus’ stranglehold on the economy and fears that Libya could saddle the market with an additional 1 million barrels per day and you have a perfect storm for those with long positions in oil.
“The market is clearly struggling with crude supply currently and I think it’s showing up in the price action,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina.
“It could be the additional Libyan (oil) that is in the market. Bottom line is that the physical markets are looking bad for oil. It doesn’t seem to be very ‘long’ any more with CTAs still very short and physical traders likely short as well,” Shelton said, referring to the Commodity Trading Advisors that include hedge funds.
New York-traded West Texas Intermediate, the key indicator for U.S. crude prices, settled down $1.50, or 3.7%, at $38.72 per barrel after hitting a 13-week low of $37.61.
London-traded Brent crude, the global benchmark for oil, was trading down $1.35, or 3.2%, at $40.95 by 3:00 PM ET (19:00 GMT), after a two-week low of $39.94.
Europe’s worst Covid-19 hotspot Madrid will go into lockdown in the coming days, and Moscow’s mayor ordered employers to send at least 30% of their staff home, as several European countries see record high virus caseloads, Reuters reported. In the United States alone, the pandemic has infected more than 7.2 million and killed more than 206,000.
In Libya, oil production has risen to 270,000 barrels per day as the OPEC member ramps up exports following the easing of a blockade by forces loyal to renegade general Khalifa Haftar..
“Increasing supplies from OPEC+ will be risking the rebalancing effort as the market is still grappling with weak demand,” ANZ Research said.