Oil prices have tumbled for the second straight day as rising coronavirus infections across the globe and new lockdowns in Europe spark fresh demand concerns for the commodity.
Futures for West Texas Intermediate (WTI) and international benchmark Brent fell around two percent on Friday. WTI plunged below $38 per barrel, while Brent was trading slightly above $40 per barrel.
Oil declined for the first time in four sessions on Thursday. Despite extending those losses at the end of the week, the crude contracts still cling to strong weekly gains, with WTI up around seven percent for the week.
The negative sentiment on the global energy market was driven by the growing number of coronavirus infections, with Europe being the biggest concern as governments have already started re-imposing strict lockdowns to contain the spread of the virus.
While the US is also seeing a rapid surge in Covid-19 cases, investors were mostly following the outcome of the election. Stocks have been rallying since Monday, but opened slightly lower opening on Friday, when Democratic presidential nominee Joe Biden was reported winning key battleground states and moving closer to victory.
Analysts say that a Biden victory could weigh on crude, as a change of power in Washington could result in the easing of pressure on Iran, whose oil industry has been hit by US sanctions. According to a MarketWatch report, citing Eugen Weinberg, analyst at Commerzbank, the Democratic hopeful’s victory would make rapprochement with Tehran more likely and thus more crude would flow into the market.
The supply glut has been a major headache for key global oil producers amid the coronavirus pandemic. In an attempt to balance the market, the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, introduced massive production cuts earlier this year. The signatories of the OPEC+ deal are scheduled to reduce the caps of 7.7 million barrels per day (bpd) by around 2 million bpd from January. However, it was earlier reported that the alliance may keep production at current levels after the deadline expires if the oil market does not show signs of recovery.
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