Oil prices continued their decline for the second day in a row, as rising crude oil production from OPEC comes amid a worsening COVID-19 pandemic which threatens to bring more restrictions on movement and consumption, and will likely hit demand for fuel.
According to oilprice.com, Brent crude was down 48 cents, or 1.17%, after falling more than 3% on Thursday. American WTI was also down by 49 cents, or 1.27%, lower at $38.23, having fallen nearly 4% in the previous session. The Bonny light crude is down $1.64 or lower by as much as 4.04% at $38.94.
American WTI is heading for a drop of nearly 5% this week, while Brent is on track to fall more than 3%, in a second consecutive week of decline for both contracts.
In a client note, ANZ Research said, “The fundamentals of oil are not encouraging … as supply rises and demand prospects look bleak.”
The catalyst for this morning’s price drop is OPEC+’s September seaborne exports, which jumped to 22.84 million barrels per day from the 22.11 that the cartel exported by sea in August.
For OPEC specifically, its exports rose from 17.53 million barrels per day in August to 18.2 million barrels per day in September.
A Reuters survey shows that rising crude supplies from the Organization of the Petroleum Exporting Countries (OPEC) is weighing on the market as September production rose by 160,000 barrels per day (BPD) from the previous month.
The increase was mainly the result of more supplies from Libya and Iran, OPEC members that are exempt from an agreement for output cut between OPEC and allies led by Russia—a group known as OPEC+.
The market is interpreting this production increase as a viable threat to any oil market rebalancing. Further pressure on oil prices is the ever-present demand question, which is a metric that has been constantly pushed down by the pandemic.
Libya’s production has risen faster than analysts expected with the relaxation of a blockade by the Libyan National Army, which is trying to take control of the capital and is mainly based in the eastern part of the country, where many oil facilities are located. The output of crude from Libya has risen to 270,000 BPD as the country ramps up export activity.