Oil Holds Gains Despite Weak Demand Outlook

By Glenn Dyer | More Articles by Glenn Dyer

Oil remains in the gun.

Friday saw oil futures prices fall about 2%, pressed by growing output from Libya, and fears that rising coronavirus infections may hold back the global economy and put more downward pressure on demand for oil and its products.

But thanks to those hopes for a COVID vaccine, oil futures on track for a second straight weekly gain.

In Europe, Brent crude fell 75 cents, or 1.7%, to settle at $US42.78 a barrel. In New York West Texas Intermediate (WTI) crude futures fell 99 cents, or 2.4%, to end the session at $US40.13 a barrel.

For the week, both notched gains of more than 8%.

Reuters reported that Libyan oil production has risen to 1.2 million barrels per day (bpd), up from the 1.0 million bpd as reported a week earlier by the country’s National Oil Corp.

More signs of plans to boost US production also hit sentiment on Friday. The number of active US oil rigs rose 10 to 236 last week, according to Baker Hughes data, the highest since May.

It was the 8th weekly rise in a row.

US production was steady at 10.5 million barrels a day.

Also pressuring prices, US government data (from the Energy Information Administration) showed crude inventories rose by 4.3 million barrels last week. Analysts had expected a fall of 913,000 barrels.

WTI and Brent contracts jumped this week after data showed an experimental COVID-19 vaccine being developed by Pfizer Inc PFE.N and Germany’s BioNTech was 90% effective.

Even with that development, though, oil demand remains shaky. The International Energy Agency (IEA) said on Thursday global oil demand was unlikely to rise significantly until well into 2021, even if the vaccine is successful.

And the OPEC cut its forecast for 2021 demand, saying consumption will rebound more slowly next year than previously thought because of the virus.

Reuters also reported that Algeria’s energy minister said OPEC+ – grouping OPEC and allies including Russia – could extend production cuts of 7.7 million barrels per day (bpd) into 2021, or deepen them further if needed.

OPEC+ is now expected to hold off on a scheduled increase in supply in January due to the weaker outlook. It was considering a reduction in its supply cuts to 5.7 million bpd. There is a meeting on December 1 to discuss the cut.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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