NEW YORK: Oil prices fell 3% on Thursday as rising coronavirus cases around the world dampened the demand outlook, and a rise in OPEC output last month also pressured prices.
Brent crude futures fell US$1.37, or 3.2%, to settle at $40.93 a barrel after dropping to a low of $39.92. U.S. West Texas Intermediate (WTI) crude futures ended down $1.50, or 3.7%, at $38.72 after sliding more than 6% to a session low of $37.61.
"It has become evident that the virus has not been contained. Infection rates are going up, the global death toll has surpassed the 1 million mark and the world is becoming a gloomy place once again," said PVM Oil analyst Tamas Varga.
In the United States alone the pandemic has infected more than 7.2 million and killed more than 206,000.
Europe's worst COVID-19 hot spot, Madrid, will go into lockdown in coming days and Moscow's mayor ordered employers to send at least 30% of their staff home, as several European countries reported records in new infections.
Standard Chartered analysts said they now expect global demand to fall 9.03 million bpd in 2020 and recover by 5.57 million bpd in 2021, leaving the 2021 average slightly below the 2016 average.
"Today's trade is sending off some strong bearish vibes given the selloff across the energy complex that is developing despite a significant lift in risk appetite and weakening U.S. dollar," said Jim Ritterbusch, president of Ritterbusch and Associates.
Increasing oil supply from the Organization of the Petroleum Exporting Countries (OPEC) also weighed on the market, with output in September up 160,000 barrels per day (bpd) from August, a Reuters survey found.
The rise was largely on the back of higher supplies from Libya and Iran, both exempt from an oil supply pact between OPEC and allies led by Russia, a grouping known as OPEC+.
Libya's oil output has risen to 270,000 bpd as the OPEC member ramps up export activity following the easing of a blockade by eastern forces, a Libyan oil source told Reuters on Thursday.
"New Libyan barrels, and reports that Russia has been overproducing, had bulls on their heels earlier in the week. Reports today that Saudi Arabia had increased exports in September by 500,000 bpd seemed to be the final straw," said Bob Yawger, director of energy futures at Mizuho.
OPEC members shipped out 18.2 million bpd in September, up from the 17.53 million bpd exported in August, data from IHS Markit Commodities at Sea showed, with Saudi Arabian exports returning to levels above 6.25 million bpd.
Earlier in the session, prices received some respite from progress in U.S. talks on a stimulus package for the world's biggest economy.
U.S. President Donald Trump's administration has proposed a new stimulus package worth more than $1.5 trillion.
However, U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin remained far from agreement on COVID-19 relief in several key areas on Thursday, after a phone discussion failed to bridge what Pelosi described as differences over dollars and values.
Congressional Democrats led by Pelosi have proposed a $2.2 trillion package to respond to the pandemic.
Did you find this article insightful?