Oil prices fell, adversely affected by fears that a significant rise in Covid-19 infections in Europe and the United States was curbing demand in two of the world’s largest fuel-consuming regions, while the strength of the US dollar added further pressure on prices.
Brent crude futures for December delivery yesterday fell 38 cents, or 0.9 percent, to $ 42.78 a barrel by 07:08 GMT, while US West Texas Intermediate crude futures for November delivery fell 35. Cents, or 0.9 percent, to 40.61 dollars a barrel.
The two benchmarks fell slightly the day before, but were almost unchanged from the previous week.
In Europe, some countries re-imposed curfews and general isolation measures to cope with a significant increase in new infections with the Coronavirus, while Britain imposed tighter restrictions to curb the spread of Covid-19 in London yesterday, which put new pressure on oil prices.
Oil also declined as the dollar headed for its best weekly performance this month yesterday, as high virus infections and stalled progress towards US stimulus caused anxious investors to seek to buy safe assets. Oil priced in dollars tends to fall when the dollar rallies, as purchases of fuel for buyers paying in other currencies become more expensive.
A technical committee of the Organization of the Petroleum Exporting Countries (OPEC) and allies of oil producers, the group known as “OPEC +”, ended their meeting the day before yesterday, and expressed concern about the rise in oil supplies while social restrictions to curb Covid-19 restrict fuel consumption.
“All eyes are on the OPEC + move from January,” said Hiroyuki Kikukawa, research director at Nissan Securities.
OPEC is set to trim current supply cuts of 7.7 million barrels per day by 2 million barrels per day in January, even as OPEC Secretary-General Muhammad Barkindo admitted that demand for fuel appears weak.
Sources in “OPEC +” said that the negative expectations of demand and the rise in supplies from Libya may mean that “OPEC” may extend the existing cuts in the next year. A meeting of “OPEC +” is scheduled for November 30 and December 1 to set policies.
In addition, a document seen by “Reuters” stated that there are fears that a long second wave of the Covid-19 pandemic and a jump in Libyan production will push the oil market into a surplus in supply next year, in expectations that are much darker than just one month ago.
Any excess supply may threaten the plans of “OPEC”, Russia and their allies, within the framework of what is known as “OPEC +”, to reduce the volume of production cuts they implemented this year by adding two million barrels of oil per day to the market in 2021, and the Organization of Petroleum Exporting Countries has not yet indicated To any plan to cancel the increase in supplies.
“The previous indications of economic recovery in some regions of the world are overwhelmed by the fragile conditions of the pace of recovery and growing doubts about them,” said the document, which was used at the committee’s monthly meeting in October.
“In particular, the risks surrounding the economic recovery and recovery of oil demand may be complicated by the resurgence of COVID-19 cases around the world and the possibility of imposing partial isolation measures in the coming winter months,” she said.
The document included scenarios, including a basic scenario, which still expects a deficit in 2021 of 1.9 million barrels per day on average, although it was less than a deficit of 2.7 million barrels per day that was expected in the basic scenario last month.
The document indicated that the worst-case scenario is that the market will turn into a surplus of 200,000 barrels per day in 2021.
OPEC + agreed this year to implement production cuts to support declining prices in light of the collapse in oil demand, and cut 9.7 million barrels per day from May, before reducing the size of the cuts to 7.7 million barrels per day from August. Restrictions eased to 5.7 million bpd from January.
However, after the committee meeting in September, Libyan production increased and an increase in the frequency of Coronavirus infections led to renewed restrictions on movement in some countries, weakening the demand for crude. OPEC member Libya is exempt from any production cuts.
A source familiar with the details of the meeting said that according to the worst scenarios in the document, Libya’s production in 2021 will increase to 1.1 million barrels per day, while in the basic scenario, Libya’s production will be 600,000 barrels per day in 2021.
The worst scenario assumes that commercial oil stocks in the Organization for Economic Cooperation and Development, a measure used by OPEC + to derive market indicators, remain high in 2021 compared to a five-year average, instead of starting to decline below that level.
The scenario assumes a second wave of Covid-19, which is stronger and continuing, in the fourth quarter of 2020 and the first quarter of 2021 in Europe, the United States and India, leading to a slowdown in the economic recovery and a decline in oil demand.
In the basic scenario in the document, oil inventories in the Organization for Economic Cooperation and Development countries are expected to be slightly more than the five-year average in the first quarter of 2021 before falling below that level in the remaining months of the year.
A ministerial committee known as the Joint Ministerial Monitoring Committee will discuss the expectations at its meeting next Monday, and the committee may come up with policy recommendations, while the oil ministers of OPEC + countries are scheduled to meet again on November 30 and December 1. .
In a related context, three commercial sources said that the Iraqi Oil Marketing Company (SOMO) sold two million barrels of Basra Light crude for loading in November at higher premiums.
According to “Reuters”, it added that the company sold the shipment to UNIPIC at a premium ranging between 30 and 40 cents a barrel to its official selling price, and the shipment is scheduled to be loaded between 28 and 30 November.
Separately, dealers said shipments of Basra Heavy crude for the November loading were trading at bonuses ranging from 40 to 50 cents a barrel to its official selling price.
On the other hand, the OPEC crude basket rose, recording $ 41.20 a barrel on Wednesday, compared to $ 40.68 a barrel the previous day. The daily report of the Organization of Petroleum Exporting Countries (OPEC) said Thursday that the price of the basket, which includes the average prices of 13 crude produced by the member states of the Organization, achieved its second consecutive increase, and that the basket gained about one dollar, compared to the same day of the previous week, which It recorded 40.45 dollars per barrel.
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