Oil fell to a four-month low, deepening Wednesday’s slump as lockdown restrictions grow in Europe.
Futures in London lost 3.9%, declining as the dollar reversed an earlier loss to trade higher. Germany and France, the European Union’s two biggest economies, will clamp down on movement for at least a month to try and curb Covid-19’s spread. There are already signs that road use in Europe is slumping, weighing on oil consumption.
As the impact of the virus rears its head across markets once again, oil is also contending with supply issues too. American crude inventories rose the most since July last week, while Libya output is also gaining rapidly. The head of Saudi Aramco’s trading unit warned there may not be enough demand to absorb the planned OPEC+ supply increase in January.
PREVIOUSLY: Oil plunges as rising U.S. oil stockpiles adds to virus woes
“The recovery of oil demand in Europe has stalled in recent weeks,” said Giovanni Staunovo, commodity analyst at UBS Group AG. “We previously forecast the oil market to be in deficit in 4Q. It now will likely be balanced and might even flip into oversupplied in November and December.”
Though crude prices have flatlined in recent months, refining margins have struggled as the recovery in consumption stalls. PBF Energy Inc. will idle a 160,000 barrel-a-day New Jersey refinery after fuel demand plummeted. Profits from making gasoline in the U.S. were the weakest since April on Wednesday.
The slump in recent days hasn’t solely affected near-term prices either. Brent for next year closed at their weakest level since May on Wednesday.
©2020 Bloomberg L.P.
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