Oil declined as Libya signalled the resumption of some crude exports, while surging coronavirus cases cloud the outlook for demand.
Futures in New York drop 2.2% to near $40 a barrel. Libya is moving closer to reopening its battered oil industry after it told companies to resume production at some fields. This will add to already rising supply from Opec+ nations, and comes as virus infections are starting to rise again in many places around the world.
The UK said it’s close to a
“tipping point” with the public health crisis, while there were predictions of at least one more virus cycle in America. Money managers have cut their bullish bets on Brent crude to the lowest in five months.
US crude jumped 10% last week after a show of determination by Saudi Arabia to defend the market. The Saudis hinted they’re prepared for new output cuts. Demand and supply worries have returned for investors at the start of this week.
Libya’s National Oil Corp. is ending force majeure — a legal status protecting a party that can’t fulfill a contract for reasons beyond its control — at “secure” facilities in the conflict-ridden nation and has told companies to resume production.
Output will probably increase to 550,000 barrels a day by the end of 2020 and to almost 1 million by the middle of next year, according to forecasts from Goldman Sachs Group
Inc. Daily crude production slumped to less than 100,000 barrels from 1.1 million at the end of last year.
“I think we’ve seen the best of the oil rally and it will struggle to make any substantial gains from now,” said Jeffrey Halley, a senior market analyst for Asia Pacific at Oanda Corp. “More lockdowns in Europe and the return of some Libyan production is weighing on sentiment.”