Volatile oil prices poised for second monthly decline on Covid-19 concerns

Global oil prices moved in and out of negative territory on Friday but remained on course for a second monthly fall as rising Covid-19 cases in Europe and the US heighten concerns over fuel consumption. Brent crude LCOc1 was down 17 cents at $37.48 a barrel by 7:15 pm IST after touching a five-month low of $36.64 in the previous session. The December Brent contract expires on Friday and the January contract LCOc2 was down about 40 cents.
 

US West Texas Intermediate (WTI) crude fell 47 cents to $35.71 after dipping to its lowest since June on Thursday at $34.92. It is on track for an 11 per cent monthly decline while Brent heads for an 8 per cent drop.
 

Prices had swung between slightly positive territory and a more than 2 per cent decline during Friday’s session, with the market “anxious” about renewed lockdowns in Europe and the US election next week, a Singapore-based oil trader said.
 

The US dollar, measured against a basket of currencies DXY, has also strengthened this week, making dollar-denominated oil more expensive for holders of other currencies.
 

The Organization of the Petroleum Exporting Countries (Opec) and allies including Russia, a group known as Opec+, had planned to raise output by 2 million barrels per day (bpd) in January.
 

However, top producers Saudi Arabia and Russia are in favour of maintaining the group’s current output reduction of about 7.7 million bpd into next year in the face of lockdowns in Europe and rising Libyan oil output.
 

Opec+ is scheduled to hold a policy meeting over November 30 and December 1. “The outcome has the potential to send oil prices $10/bbl in either direction,” PVM analysts said of the meeting.
 

Governments across Europe imposed fresh restrictions this week to curb the spread of the coronvirus, with Germany saying its economy will not fully recover before 2022.
 

While that has reduced mobility and fuel consumption within Europe, demand in the United States is holding up for now, RBC Capital’s Mike Tran said in a note.