Oil Dips Once More On Covid Infections, A Possible Stay On Course For OPEC

But KAPSARC is optimistic about 2021 economic recovery and $65 oil: File Image/PixaBay

With yet another price drop on Friday driven by France and Germany ordering lockdowns to slow Covid infections, crude benchmarks Brent and West Texas Intermediate incurred dismal monthly losses of 10 percent and 11 percent respectively - and analysts think more bad news may be in the offing.

Brent on Friday dropped 19 cents to settle at $37.46 per barrel, with the front-month Brent contract expiring on Friday and the January contract settling down 32 cents; WTI fell 38 cents to settle at $35.79 per barrel.

Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy, said of Covid, "These infection levels are destined to bite oil demand, as traffic will be curbed to a minimum during the coming lockdowns."

Also, even though Saudi Arabia and Russia are for maintaining the Organization of the Petroleum Exporting Countries' (OPEC) current output reduction of about 7.7 million barrels per day (bpd) into next year to help achieve market balance, pundits are worried that the cartel might decide to ease reductions after it meets on November 30.

PVM analysts said of the meeting, "The outcome has the potential to send oil prices $10/bbl in either direction."

Meanwhile, good or bad news depending on one's perspective was delivered on Friday by the U.S. Energy Information Administration, which revealed that American oil output  fell 3.6 percent to 10.6 million bpd in August, down 14.9 percent from average U.S. output of 12.4 million bpd in August 2019 and the first decline of output in three months.

Mixed news was also delivered on Friday by Chevron, which reported its second straight quarter of losses (of $207 million) after revenue during the third quarter fell 32 percent year over year; however, the oil giant earned 11 cents per share on an adjusted basis, far better than the 27 cent per share loss expected by analysts (the company's revenue came in at $24.45 billion).

By contrast, Total on Friday posted a third quarter income of $848 million, down 72 percent from a year earlier but well above the average analytical prediction of $478 million; the company said it has achieved resilience in a market of $40 oil.

As for a bird's eye view of the market and where it is leading, Adam Sieminski, president of the King Abdullah Petroleum Studies and Research Center, told Bloomberg television that despite Covid and the latest lockdowns, "We've had a clear recovery from the worst of times back in April and May, and I'm fairly hopeful we're going to see economic recovery out into 2021, and that should begin to rebalance the markets."

He predicted that oil will rise to $60-$65 per barrel some time in 2022.