London — Oil prices fell more than 3% on Thursday, extending the previous day’s sharp decline under pressure from signs of a growing global oil supply glut as governments renew restrictions to counter a resurgent coronavirus.
Brent crude futures were down $1.28, or 3.3%, at $37.84 by 9.54am GMT, their lowest since mid-June. US West Texas Intermediate (WTI) crude futures fell $1.27, or 3.4%, to a seven-week low of $36.12.
Both contracts plunged by more than 5% on Wednesday.
With Covid-19 cases surging across Europe, France will require people to stay at home for all but essential activities from Friday, while Germany will shut bars, restaurants and theatres from November 2 until the end of the month. “As lockdowns begin to bite on demand concerns across Europe, the near-term outlook for crude starts to deteriorate,” said Stephen Innes, chief global market strategist at Axi.
Oil cartel Opec and its allies, including Russia (Opec+) will be monitoring the deteriorating demand outlook closely. Opec+ plans on tapering production cuts in January 2021 from a current 7.7-million barrels per day (bpd) to about 5.7-million bpd.
“I believe it is increasingly unlikely that oil production will be stepped up from January,” Commerzbank said. “Instead, Opec+ will really need to implement further production cuts, given the weak prospects for demand.”
Opec+ is scheduled to meet on November 30 and December 1 to set policy.
Rising Libyan oil production is also weighing on sentiment. The Opec member expects production to reach 1-million bpd in the next few weeks, doubling from levels earlier this month.
Oil had initially rebounded slightly from overnight losses in Asian morning trade on technical support and the prospect of tighter short-term supply as Hurricane Zeta slams Louisiana. But the hurricane is forecast to weaken by Thursday morning in the US and the return of US production will add to existing oversupply.