Only Total's boss envisioned good news in the form of declining inventories: File Image/PixaBay
The media-fuelled perception that the coronavirus is getting worse was one of the key reasons oil prices continued to slip on Monday, after posting two consecutive weeks of losses due to worries that demand recovery was stalling.
The worries were so intense that they cancelled support that would have normally come from the advent of a major storm, in this case tropical Storm Sally, poised to become a category 2 hurricane and disrupting oil production in the Gulf of Mexico for the second time in less than a month.
Brent on Monday was down 35 cents at $39.48 per barrel while West Texas Intermediate settled 7 cents lower at $37.26 per barrel.
Tamas Varga, analyst, PVM
This leads to dismal oil demand growth
Tamas Varga, analyst at PVM Oil Associates, noted that ″Infection rates are on the rise again, there are localized lockdowns introduced in a growing number of countries hindering regional economic growth, and the number of unemployed is failing to fall significantly; this leads to dismal oil demand growth."
But rising infection rates are hardly across the board: U.S. states on Monday continued to report falling numbers, and Czech Republic's daily count of cases dropped below 1,000; this comes on the heels of decreasing infections in Singapore, Philippines, South Korea, and other countries.
Not helping traders' outlook was the Organization of the Petroleum Exporting Countries (OPEC) stating on Monday that world oil demand would tumble by 9.46 million barrels per day (bpd) this year, a sharper decline than predicted a month ago.
The cartel rationalized its stance by stating that risks "remain skewed to the downside, particularly in relation to the development of Covid-19 infection cases and potential vaccines."
But again, the sentiment clashes with the latest news: over the weekend AstraZeneca said it was resuming its late stage vaccine trials after a highly-publicized pause, and Pfizer announced that its vaccine in late stage trials could be distributed throughout the U.S. by the end of October.
Libya also became a focal point of concern on Monday, where officials said a months-long blockade of oil facilities would end: "If Libya's production comes back online soon, we are talking about 1 million bpd or more, this will be a significant addition to the global balances - and the market is pricing this in today," remarked Bjornar Tonhaugen, head of oil markets at Rystad Energy.
The only cautiously optimistic note about the state of the oil industry on Monday was struck by Russell Hardy, chief executive of Vitol, who told a a global petroleum conference that after oil storage peaks at the nadir of the pandemic, the market was "slowly chewing through that excess inventory."
Next up: the International Energy Agency will update its projections for global oil demand in its monthly report due Tuesday, after an IEA official pointed out the market appeared to be stuck between a stalled recovery and the absence of any major new lockdowns.