Oil prices fell for the fourth day in a row on Tuesday amid concerns that a resurgence of coronavirus cases globally is holding back a promising recovery in fuel demand, while increased production in Libya is fueling abundant supply.
“There are clouds of darkness again on the oil market,” said Vandana Hari, energy analyst at Vanda Insights.
Brent crude oil futures fell 32 cents, or 0.8%, to $ 42.30 a barrel by 0418 GMT, after falling 31 cents on Monday.
US WTI crude oil futures fell 26 cents, or 0.6%, to $ 40.57 a barrel, after falling 5 cents on Monday.
Covid-19 cases surpassed 40 million on Monday, with a second surge in Europe and North America sparking new crackdowns, according to Reuters.
“The demand picture was already weak; supply sentiment suffered on Monday as Saudi Arabia and Russia shied away from signaling they would revise OPEC + 's planned January production growth, ”Hari said.
A meeting on Monday of the ministerial group of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively named OPEC +, pledged to bolster the oil market as concerns about rising diseases rise.
OPEC + is currently adhering to an agreement to limit production by 7.7 million barrels per day (barrels per day) until December, and then to reduce production to 5.8 million barrels per day in January.
However, three sources from producing countries said the planned increase in production from January could be canceled if necessary.
“We do not think the oil markets will be able to absorb about 2% of global supply, which OPEC + is expected to resume on January 1, 2021,” said Vivek Dhar, a commodities analyst at Commonwealth Bank.
The rise in production from Libya, which operates outside the OPEC + pact, heightens fears of an oversupply, he said.
Libya is rapidly ramping up production after nearly all production in the country was halted in January following an armed conflict. Production at the largest Sharara field, which opened on Oct. 11, currently stands at about 150,000 barrels per day, or about half of its capacity, two industry sources told Reuters.
Meanwhile, traders will be watching data on oil and petroleum products from the American Petroleum Institute on Tuesday. Analysts expect US crude oil and distillate stocks to likely fall in the last week, according to a Reuters poll.
“Since April we have witnessed a miraculous recovery in oil demand, which is now about 92% of the level before the pandemic, but it is too early to announce the end of the era of oil demand collapse due to COVID-19,” said oil markets analyst Rystad Energy Louise Dixon.