Oil prices settled sharply lower Sept. 21 as the market eyed rising Libyan production and the prospect of more demand-destroying lockdowns on the horizon in Europe.
NYMEX October WTI settled $1.80/b lower at $39.31/b and ICE November Brent finished trading down $1.71 at $41.44/b.
A resurgence of COVID-19 coronavirus cases in Europe raised the specter of a return to lockdowns, sending US equity prices sharply lower and adding additional weight to an energy complex already under pressure from the prospect of rising supply.
UK leaders are considering instituting new lockdown measures in the face of a steep rise in the number of new coronavirus infections, according to media reports. The move could herald a return to global lockdowns as the risks of a so-called second wave of infection increases with the onset of cooler weather in the northern hemisphere.
With global refined product appetite still on the back foot from the spring lockdowns, further restrictions on travel and trade are likely to weigh heavily on crude and product demand. US refined product demand was 15% below normal as of the week ended Sept. 11, according to US Energy Information Administration data.
NYMEX October RBOB settled down 5.95 cents at $1.1771/gal and October ULSD was 5.17 cents lower on the day $1.1073/gal.
Futures were already lower overnight after Libya's state-owned National Oil Corp. said Sept. 19 it had lifted force majeure on oil fields and ports, excluding facilities where militants are still present, a day after the Libyan National Army announced an end to an eight-month oil blockade.
Regional price differentials were little moved by the news. Platts Es Sider FOB Libya was assessed at a $1.40/b discount to the Med Dtd strip, in from $1.45/ on Sept, while the Platts Azeri Light CIF Augusta premium to the BTC Dtd strip edged down to 90 cents/b from 95 cents/b the session prior.
Analysts were mixed on the impact of the lifting of the Libya blockade, which could send up to 1.1 million b/d of crude to the market and potentially complicate the OPEC+ coalition's attempt at balancing an oil market still awash with oil.
"OPEC+ tentatively provided some relief that the oil market was heading toward balance, but rising output from Libya puts that at risk," OANDA senior market analyst Edward Moya said in a note.
But Goldman Sachs analysts, citing "significant uncertainty on the timing, magnitude and sustainability" of a restart, forecast Libya production to rise by just 400,000 b/d by December, and noted that any upside risk to the forecast is offset by downside supply risks from better OPEC+ compliance.
Meanwhile, offshore US Gulf of Mexico oil and gas production continued to recover Sept. 21 as Tropical Storm Beta was preparing to make landfall along the Texas coast, US Bureau of Safety and Environmental Enforcement data showed.
Less than 10% of the Gulf's oil and gas volumes remained offline on Sept. 21 from the effects of Hurricane Sally last week, with much of the production still offline coming from Shell's Perdido platform in the western Gulf that was shut in ahead of Beta.
