Oil futures fell sharply on Tuesday, sending U.S. and global benchmark crude prices to their lowest finish in two weeks.
Investors worried about rising cases of COVID-19 throughout the globe, a development that may harm appetite for oil and other energy assets in the longer-term.
The global death toll from the coronavirus pandemic has surpassed one million globally, while the U.S. accounts for more than a fifth of the nearly 33.4 million cases, with more than 200,000 deaths.
“For the market, it is a reminder that the unprecedented challenges created by COVID-19 and efforts to limit the spread offer little in the way of quick solutions, ” said Robbie Fraser, senior commodity analyst at Schneider Electric, in a daily note. The pandemic also represents “a significant and ongoing downside risk as the crude market looks to continue a demand rebound.”
Against that backdrop, West Texas Intermediate crude for November delivery
fell $1.31, or 3.2%, to settle at $39.29 a barrel on the New York Mercantile Exchange, after gaining 0.9% on Monday.
Front-month November Brent
lost $1.40, or 3.3%, to end at $41.03 a barrel, after climbing 1.2% in the prior session. The contract expires at the end of Wednesday’s session.
Both WTI and Brent futures settled at their lowest front-month prices since Sept. 15, according to Dow Jones Market Data.
On Monday, oil futures finished higher but gains were limited by growing concerns about renewed coronavirus lockdowns in parts of the world.
Contributing to support oil prices Monday, however, was a possible disruption to oil output in Norway. The Norwegian Oil and Gas Association said oil firms in Norway plan to close down 22% of the country’s oil-and-gas output, or 900,000 barrels of oil equivalent per day, if oil workers go on strike Wednesday, Reuters reported Friday. Some weakness in the U.S. dollar, as measured by the ICE U.S. Dollar Index
also helped to lift crude prices in the prior session, commodity pros said.
Traders in the oil market have also been watching developments tied to a conflict in southwestern Asia. Armenian and Azerbaijani forces have been fighting over the separatist region of Nagorno-Karabakh.
The clashes between Armenia and Azerbaijan have “kept markets on edge,” as an escalation in the conflict “could affect oil and gas exports from Azerbaijan,” said analysts at ICICI Bank.
Investors will be looking for weekly data on U.S. oil stockpiles from the American Petroleum Institute data late Tuesday and from the Energy Information Administration on Wednesday.
On average, analysts expect the EIA to report a climb of 1.9 million barrels in crude supplies for the week ended Sept. 25, according to a survey conducted by S&P Global Platts. They also forecast inventory declines of 1.3 million barrels for gasoline and 1.7 million barrels for distillates, which include heating oil.
In its first full session as a front-month contract, November natural gas
dropped 8.4% to $2.561 per million British thermal units.
“Weather forecasts call for above-normal temperatures in the west over the next 6 to 14 days, but below-normal temperatures in the east,” said Christin Redmond, commodity analyst at Schneider Electric.
“Above-normal temperatures will now be a bearish driver for prices as it would likely result in less heating demand, while below-normal temperatures would generally be supportive as it would likely result in more heating demand,” she explained in a note.