Singapore — 0316 GMT: Oil futures recovered slightly during the mid-morning trade in Asia Sept. 22, after the prospect of renewed lockdowns amid a potential resurgence of the coronavirus pandemic drove futures down Sept. 21.
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At 11:16 am Singapore time (0316 GMT), ICE Brent November crude futures were trading at $41.54/b, up 10 cents/b (0.24%) from the Sept. 21 settle, while the NYMEX October light sweet crude contract was at $39.57/b, up 26 cents/b (0.66%).
This uptick in crude futures comes after the November Brent and the October WTI plummeted $1.71/b and 1.80/b to close at $41.44/b and $39.31/b, respectively, on Sept. 21, following fears of renewed lockdown restrictions during the winter months, when the coronavirus is expected to spread faster.
The prospect of fresh lockdown restrictions has hit the oil market hard, since such restrictions could hamper global economic recovery, and weigh down demand for crude oil, analysts said.
"Many oil traders are subscribing to the dominant macro narrative that as far as the oil price recovery is concerned, last week's top might be as good as it gets for a while when mapping oil prices tangentially to the rebound in economic activity," said Stephen Innes, Chief Global Markets Strategist at Axi, in a Sept. 22 note.
Concerns lingered over the lifting of the Libya blockade, which could send up to 1.1 million b/d of crude to an already oversupplied market, even as Goldman Sachs analysts forecast on Sept. 21 that Libyan production would rise by just 400,000 b/d by December due to "significant uncertainty on the timing, magnitude and sustainability" of a restart.
They added that any upside supply risk to the forecast is offset by downside supply risks from better OPEC+ compliance.
Innes also noted that OPEC+ compliance remains key to balancing supply and demand in the crude oil markets. "OPEC's call for laggards to fully comply with their quotas by year-end must be delivered to offset the Libyan increased production risks," he said.