Source: World Oil, by James Thornhill
Oil extended its biggest monthly decline since March after a surge in coronavirus infections in the U.S. and Europe dented prospects for a rebound in demand.
Futures in New York declined 0.4%, after hitting their lowest since June on Thursday. The Covid-19 surge in the U.S. Midwest rose to a record, and the seven-day average in the Northeast reached the most since May. Elsewhere, Italy reached another daily record in virus cases, potentially facing new restrictions on movement.
Crude found some support from data showing a record, yet temporary, surge in U.S. economic growth in the third quarter, while European Central Bank President Christine Lagarde signaled a new package of monetary stimulus in December.
The demand outlook is still bleak with the European Union’s two biggest economies set to impose month-long movement restrictions as nations across the continent post record coronavirus cases. A boost to consumption in the form of U.S. stimulus will likely have to wait until after Nov. 3, with both sides at a standstill a week out from the election. The forward market structure is also flashing warning signs, with the WTI strip for 2021 closing at its weakest level since May.
For fragile oil markets, the outcome of next week’s U.S. election poses yet another risk: the prospect that major producer Iran may regain its role in international trade.
Meanwhile, U.S. Gulf operators are still dealing with the effects of Tropical Storm Zeta, with Royal Dutch Shell Plc shutting crude and natural gas production overnight in the Mars Corridor due to downstream impacts from the storm.
The industry continues to suffer in the face of the pandemic, with Exxon Mobil Corp. announcing plans to slash its global workforce by 15% by the end of 2022, an unprecedented culling by North America’s biggest oil explorer as it struggles to preserve dividends.