Oil futures declined Thursday to post their lowest settlement in roughly five months, as rising COVID-19 cases sparked tighter restrictions on activity in Europe and underlined worries about the outlook for the U.S. and global economic recovery.
West Texas Intermediate crude for December delivery
fell $1.22, or 3.3%, to settle at $36.17 a barrel on the New York Mercantile Exchange. That was the lowest settlement for a front-month contract since June 1, according to Dow Jones Market Data. Month to date, prices were lower by roughly 10%.
December Brent crude
the global benchmark, lost $1.47, or 3.8%, at $37.65 a barrel on ICE Futures Europe, with prices for the front-month contract finishing at their lowest since May 29.
“Clearly this latest wave of COVID-19 will weigh somewhat on oil demand, and with ICE Brent now trading just below $40 [a barrel], OPEC+ will likely be under pressure to take action when they meet at the end of November,” said Warren Patterson, head of commodities strategy at ING, in a note.
For now, that means the OPEC+ alliance likely will roll over existing output cuts into 2021, forgoing a relaxation of curbs scheduled for January, he said, a move that would also help offset the surge in production by Libya.
However, the U.S. presidential election remains a wild card, with a potential victory by Democratic challenger Joe Biden over President Donald Trump opening the way to a return to the Iranian nuclear deal and the lifting of sanctions that could bring between 1.5 million to 2 million barrels a day of oil supply back on to the market, he said.
Read: Here’s how the U.S. presidential election could shake up the oil market
Also see: Why a Biden presidency may lead to higher gasoline prices
Oil fell sharply Thursday as France and Germany imposed tighter restrictions in response to the rising number of COVID-19 cases. The U.S. reported 79,000 new cases on Wednesday, the second day in a row that the figure topped 70,000, as several states reported a jump in infections, according to The Wall Street Journal.
Oil traders looked past the production disruptions caused by Hurricane Zeta, which made landfall in Louisiana Wednesday as a Category 2 storm. The Bureau of Safety and Environmental Enforcement on Thursday estimated that 84.8% of oil production in the Gulf of Mexico had been shut-in by the storm, along with around 57.6% of natural-gas production.
See: Hurricane Zeta batters New Orleans, Gulf Coast; massive power outages
Data released Thursday showing that the U.S. economy expanded at a record 33.1% annual pace in the third quarter failed to provide support for oil prices.
“We expect future growth rates to slow significantly in Q4 2020 and beyond,” wrote Jason Schenker, president of Prestige Economics, in emailed commentary. “Plus, we still do not expect U.S. real GDP to be back to Q4 2019 levels until 2022.”
In other Nymex trading Thursday, December natural gas
rose 0.3% settle at $3.301 per million British thermal units.
The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 29 billion cubic feet for the week ended Oct. 23. On average, supplies were expected to climb by 37 billion cubic feet for the week, according to analysts polled by S&P Global Platts.
Among the petroleum products, November gasoline
lost 2.8% to $1.0515 a gallon and November heating oil
declined by 2.3% to $1.0884 a gallon. The November contracts expire at the end of Friday’s trading session.