Oil prices fall sharply on weak demand outlook and higher OPEC supplies

Oil prices fell sharply on Thursday as rising coronavirus cases dampened the demand outlook, with further price pressure from a rise in OPEC output
last month, though losses were capped by renewed hopes for US fiscal stimulus.

Brent crude futures fell $1.64, or 3.9 percent, to $40.66 a barrel by 1401 GMT and US West Texas Intermediate (WTI) crude futures were down $1.75, or 4.4 percent, at $38.47.

“It has become evident that the virus has not been contained. Infection rates are going up, the global death toll has surpassed the 1 million mark and the world is becoming a gloomy place once again,” said PVM Oil analyst Tamas Varga.

In the United States alone the pandemic has infected more than 7.2 million and killed more than 206,000.

Increasing oil supply from the Organization of the Petroleum Exporting Countries (OPEC) also weighed on the market, with output in September up 160,000 barrels per day (bpd) from August, a Reuters survey found.

The rise was largely on the back of higher supplies from Libya and Iran, both exempt from an oil supply pact between OPEC and allies led by Russia, a grouping known as OPEC+.

“Increasing supplies from OPEC+ will be risking the rebalancing effort as the market is still grappling with weak demand,” ANZ Research said.

Prices received some respite from progress in US talks on a stimulus package for the world’s biggest economy.

US President Donald Trump’s administration has proposed a new stimulus package worth more than $1.5 trillion.

US Treasury Secretary Steven Mnuchin earlier said that talks with House Speaker Nancy Pelosi had made progress on COVID-19 relief legislation, and the House of Representatives postponed a vote on a $2.2 trillion Democratic coronavirus plan to allow more time to agree a bipartisan deal.

In Norway, a labor union said it would escalate offshore industrial action to four additional fields from Oct. 4 after dozens of workers went on strike at the 470,000 bpd Johan Sverdrup oilfield.

Sverdrup operator Equinor said it could maintain safe operations at the oilfield despite the strike.