Oil prices fell about 2 per cent on Friday, pressured by swelling output from Libya and fears that rising coronavirus infections may slow the recovery in the global economy and fuel demand.
Hopes for a vaccine kept crude futures on track for a second straight weekly gain.
Brent crude was down 59 cents, or 1.4 per cent, at $42.94 a barrel as of 1:27 p.m. ET. U.S. West Texas Intermediate (WTI) crude futures fell 81 cents, or 2 per cent, to $40.31 a barrel.
For the week, both were headed for a rise of more than 8 per cent.
Libyan oil production has risen to 1.2 million barrels per day (bpd), a Libyan oil source told Reuters, up from the 1.0 million bpd reported on Nov. 7 by the country’s National Oil Corp.
Signs of rising production in the U.S. added to bearish sentiment. U.S. oil rigs rose 10 to 236 this week, according to Baker Hughes data, their highest since May.
Also pressuring prices, U.S. government data showed crude inventories rose by 4.3 million barrels last week. Analysts had expected a draw of 913,000 barrels.
“In essence, some of the feel-good factor from the Pfizer vaccine has worn off and disappointing EIA figures have created a bit of a downward correction,” Harry Tchilinguirian, head of commodity research at BNP Paribas, said.
“However, OPEC+ is prepared to tweak its production and we’re still waiting for the trial results of other vaccines that may be easier to distribute since they won’t need such cold storage.”
New coronavirus infections in the United States and elsewhere are at record levels and tightening restrictions should lead to fuel demand recovering more slowly than many had hoped.
WTI and Brent contracts jumped this week after data showed an experimental COVID-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90 per cent effective.
But on Thursday, the International Energy Agency (IEA) said global oil demand was unlikely to get a significant boost from vaccines until well into 2021.
“It’s no surprise that the market is trimming the price gains today as realities for crude supply and demand are grim, while daily new Covid-19 cases in the U.S. are setting new records for the third-straight day,” Bjornar Tonhaugen, head of oil markets at Rystad, said.
“Our crude and liquids balances suggest oil prices need to go lower before they go higher.”
Analysts say tougher restrictions on mobility to deal with sky-rocketing coronavirus cases mean the Organization of the Petroleum Exporting Countries and its allies may hesitate to loosen output curbs as planned in January.
The group known as OPEC+ is due to hold a Joint Ministerial Monitoring Committee next week, which will give some indications of what the producers may decide at the next ministerial meeting on Dec. 1.
Algeria’s energy minister said this week that OPEC+ could extend the group’s current oil production cuts into 2021 or deepen them further if required.
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