Oil slips as surge in virus cases clouds demand recovery
Oil prices dipped on Monday as rising coronavirus cases upset hopes for a
smooth recovery in fuel demand, with the main crude benchmarks on track
for their first monthly falls in multiple months after slipping last
week.
Brent crude (LCOc1) fell 37 cents, or 0.9%, to $41.55 a
barrel by 0652 GMT after dropping 2.9% last week. U.S. West Texas
Intermediate (CLc1) was at $39.86 a barrel, down 39 cents or 1%,
following a 2.1% decline last week.
Brent is on track to fall for
the first month in six while WTI is headed for its first monthly loss
since April as the reimposition of mobility curbs in some countries
clouds the outlook on fuel demand recovery.
"New COVID-19 case
numbers are accelerating in major U.S. states, renewing fears of
mobility restrictions challenging the ongoing oil demand recovery in the
last quarter," ANZ analysts said in a note.
Russian Energy
Minister Alexander Novak said on Monday that the global oil market has
been stable for the past few months and the demand-supply balance
restored, but warned of the risks of a second wave of COVID-19 cases.
More
crude is also being exported from OPEC producers Iran and Libya despite
efforts by the Organization of the Petroleum Exporting Countries and
their allies to limit output.
Last week, U.S. energy firms also added oil and natural gas rigs for a second week in a row, according to Baker Hughes.
Still,
OPEC Secretary General Mohammad Barkindo said on Sunday that commercial
oil inventories in OECD countries are expected to stand only slightly
above the five-year average in the first quarter of 2021, before falling
below that level for the rest of the year.
The one factor that may offer some support to the market is the prospect of strike action, ING analysts said.
In
Norway, one of the largest oil producers outside OPEC, a workers'
strike that may take place on Sept. 30 is threatening to cut its
production by 900,000 barrels per day, the Norwegian Oil and Gas
Association (NOG) said on Friday.
Also, one of the heaviest
clashes between Armenia and Azerbaijan since 2016 broke out over the
weekend, reigniting concern about stability in the South Caucasus, a
corridor for pipelines carrying oil and gas to world markets.
The
U.S. Commodity Futures Trading Commission (CFTC) said on Friday that
money managers raised their net long U.S. crude futures and options
positions in the week to Sept. 22.
"The bulk of the buying that
was seen over the week was driven by short-covering, with the gross
short position falling by a little over 20k lots," the ING analysts
said. Investors may have heeded the Saudi oil minister's warning against
shorting the oil market, they said.
Source : investing.com