Oil Prices Tumble on Lockdown Fears

(Bloomberg) -- Oil slid to a two-week low as conflicting signals over the prospect of U.S. fiscal relief added to concerns over a recovery in consumption.
Futures in New York tumbled 3.7% on Thursday as the dollar bounced off session lows. U.S. benchmark futures settled below its key 100-day moving average for the first time since June, signaling further selling pressure ahead.
Chances for a much needed boost in demand remains uncertain, with talks Thursday between U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin yielding no immediate breakthrough on a deal for fiscal relief. At the same time, coronavirus flareups are causing renewed concerns over more lockdown measures, with New York reporting its most virus cases since May, a key public health official in London saying the city is at a “tipping point” and Madrid already adding more restrictions on movement.
“The idea of more lockdowns worrying traders and investors, the stimulus in question and the aspect of the technicals too,” are weighing on prices, said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC. “Everything stems back to Covid.”
After posting a nearly 6% decline in September, oil is off to a rocky start this month with the combination of weak demand and signs of increased supply from key global producers weighing on markets, including the unexpected return of Libyan output. Saudi Arabia’s crude exports jumped by half-a-million barrels a day in September and Russia’s exports are also expected to increase.
Still, the Organization of Petroleum Exporting Countries’ crude production held steady last month as the United Arab Emirates trimmed output in order to better comply with limits set by the cartel.
“The move is both fundamental and flow driven and the recent uptick in virus outbreaks has certainly put the already fragile demand recovery back in question,” said Ryan Fitzmaurice, commodities strategist at Rabobank.
Prices
- West Texas Intermediate for November delivery slid $1.50 to end the session at $38.72 a barrel
- Brent for December settlement declined $1.37 to settle at $40.93 a barrel, after dipping below the key $40-a-barrel level during the session
Other pockets of the market are also showing weakness. WTI’s prompt spread -- the difference in price of the nearest-dated contracts -- fell further into contango on Thursday, signaling concerns of oversupply. In physical markets, Poseidon crude traded at its widest discount to WTI futures in nearly a week.
Energy stocks were the worst performing component of the S&P 500 Index on Thursday, falling over 3% as the broader index rallied. All members of the S&P 500 Energy Index dropped, with Valero Energy Corp. among the weakest after a downgrade from Goldman Sachs Group Inc.
Other oil-market news
- Exxon Mobil Corp. gave a glimpse Thursday of its third-quarter financial performance that includes a worsening picture at its oil-refining business and further losses for the energy giant’s upstream unit.
- Four Singapore-based crude oil traders from BP Plc left the company after the conclusion of internal investigations into their involvement in several disputed deals, said people with knowledge of the situation.
- Colonial Pipeline says shippers should expect volumes of RBOB to fluctuate more than usual next year because of new EPA regulations requiring “protective handling.”
--With assistance from Elizabeth Low and Alex Longley.
© 2020 Bloomberg L.P.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- USA EIA Hikes Up 2023 and 2024 Brent Oil Price Forecasts
- Macquarie Group Reveals Oil Market Outlook
- Chevron Starts Up Gorgon Extension Project
- Biden Urged to Demand Climate Emergency as Smoke Chokes Washington
- Eni Inks Deal to Build Hybrid Renewables-Gas Plant in Kazakhstan
- Enagas Opens Logistics Bidding for Mothballed Asturias Terminal
- ADNOC Chief: Shift from Fossil Fuel Unavoidable
- Oil Down as Demand Concerns Supercede Saudi Cuts
- Improved Wage Offer Ends North Sea Dispute
- Global Oil Demand for Road Transport to Peak in 2027: BNEF
- Saudis Remind Global Oil Market Who is King
- Saudi to Cut Output by 1MM BPD in Solo OPEC+ Move
- Data Science is the Future of Oil and Gas
- Debt Ceiling Deal Becomes Law
- Two Main Forces Have Come Together to Pull Down Commodity Prices
- What Do Latest OPEC+ Moves Mean?
- Fatality At North Rankin Complex
- USA Shale Seen Holding Firm on Returns
- Par Pacific Completes Buy of ExxonMobil Refinery
- North America Loses More Rigs
- Which Generation Is Most in Demand in Oil, Gas Right Now?
- Who Is the Most Prolific Private Oil and Gas Producer in the USA?
- BMI Reveals Latest Brent Oil Price Forecasts
- Is There a Danger That Oil and Gas Runs out of Financing?
- BMI Projects Gasoline Price Through to 2026
- What Will World Oil Demand Be in 2023?
- North America Rig Count Reduction Rumbles On
- What New Oil and Gas Jobs Will Exist in the Future?
- What Does a 2023 USA Recession Mean for Oil and Gas in the Country?
- USA Oil and Gas Supported Nearly 11MM Jobs