Oil prices slid early on Friday and were on track for a flat weekly performance, as new coronavirus cases in Europe and the United States continued to spike, alarming the market that the oil demand recovery will be derailed.
As of 10:25 a.m. EDT on Friday, WTI Crude prices were trading down 1.10 percent on the day, at $40.49. Brent Crude was down 1.14 percent at $42.66. A stronger U.S. dollar, which makes buying oil more expensive for holders of other currencies, also weighed on oil prices on Friday.
This week, oil prices have been dragged down by concerns of supply increases amid stalled demand recovery, as many countries, especially in Europe, are re-imposing some of the restrictions to curb the spread of the coronavirus as many major economies, from the UK to Germany, France, and Italy, are battling a second COVID-19 wave.
More oil supply returned at the start of this week after the Norwegian oil strike ended, the U.S. Gulf oil production began coming online following Hurricane Delta, and Libya restarted its biggest oilfield, Sharara. Currently, Libya is said to be producing around 500,000 barrels per day (bpd), with Sharara pumping as much as 110,000 bpd less than a week after its restart.
Even the OPEC+ group is closely monitoring the supply increase from Libya, which is exempted from the production cuts and could derail the alliance’s efforts to prop up oil prices and the plans to have the ongoing cuts eased by another 2 million bpd as of January.
The supply increase comes at a challenging moment for global oil demand, with new U.S. COVID-19 cases topping 60,000 in a day for the first time in two months, while the UK, France, Ireland, and Germany imposed tougher restrictions, including curfews in some areas.
The surge in coronavirus cases in many major developed oil-consuming economies has rekindled fears that the oil demand recovery is again off track, and market balancing is still further away.
By Tsvetana Paraskova for Oilprice.com
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