Fears of fuel demand being stifled drive oil prices lower

London — Oil prices fell on Tuesday on worries that a resurgence of coronavirus cases globally is stifling a recovery in fuel demand while growing Libyan output adds to already plentiful supply.

Brent crude futures were trading down 34 US cents, or 0.8%, at $42.28 a barrel by 9.03am GMT. US West Texas Intermediate (WTI) crude futures fell 15c, or 0.4%, to $40.68.

Covid-19 cases topped 40-million on Monday, according to a Reuters tally, with a growing second wave in Europe and North America sparking various degrees of lockdown measures.

A meeting on Monday of a ministerial panel of Opec and its allies, together known as Opec+, pledged to support the oil market as concerns grow over soaring coronavirus cases.

For now Opec+ is sticking with a deal to curb output by 7.7-million barrels per day (bpd) to the end of the year and then increasing production by two-million bpd in January.

“Monday’s JMMC meeting failed to match market hopes of scrapping the planned output rise in January amid an increasingly precarious demand environment,” JBC Energy said.

Opec watchers, including analysts from US bank JPMorgan, have said that a weak demand outlook could prompt Opec+ to delay the reduction in curbs.

“Demand recovery is uneven … Today this process has slowed down because of a second coronavirus wave but has not yet fully reversed,” Russian energy minister Alexander Novak told the JMMC meeting.

Opec member Libya, which is exempt from the cuts, is ramping up production after armed conflict shut almost all of the country’s output in January.

Output from its biggest field, Sharara, resumed on October 11 and is now at about 150,000 bpd, about half its capacity, two industry sources told Reuters.

Another 70,000 bpd oilfield is expected to restart on October 24.

Reuters