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Oct. 23, 2020, 3:20 p.m. EDT

Oil suffers a loss, dragging U.S. benchmark below $40 a barrel

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By Myra P. Saefong and William Watts

Oil fell on Friday, with increasing exports from Libya, uncertainty over another U.S. relief plan and worries about crude demand prompting U.S. prices to settle below $40 a barrel for the first time in nearly three weeks.

Libya’s National Oil Corporation said it lifted force majeure on its shipping commitments from the Es Sider and Ras Lanuf ports, Reuters reported Friday —meaning that those ports can meet contractual obligations on oil exports.

Libya’s “exports could surpass one million [barrels per day] in four weeks,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. Libya resumed oil exports last month after the lifting of an eight-month port blockade.

Libya’s oil output reached 560,000 barrels a day on Wednesday, up from 150,000 in September, according to a report from Bloomberg , citing a person with knowledge of the matter.

The United Nation’s Libya mission said Friday that the country’s warring sides signed a deal for a “permanent ceasefire in all areas of Libya,” according to a report from Al Jazeera .

Libya remains exempt from production cuts by the Organization of the Petroleum Exporting Countries and their allies, and “continues to make progress around restoring supply and exports,” said Robbie Fraser, senior commodity analyst at Schneider Electric, in a Friday note.

West Texas Intermediate crude for December delivery fell 79 cents, or 1.9%, to settle at $39.85 a barrel on the New York Mercantile Exchange–the lowest finish since Oct. 12.

December Brent crude , the global benchmark, lost 69 cents, or 1.6%, closing at $41.77 a barrel on ICE Futures Europe.

Based on the front-month contracts, WTI crude saw a 3.1% weekly fall, while Brent declined by 2.7%, according to Dow Jones Market Data.

Congress and the White House have been trying to “hammer out a stimulus agreement prior to the election, while the pandemic continues to surge in much of Europe and the U.S.,” said Steeves. “The renewed imposition of lockdowns and travel restrictions threatens demand, so fiscal assistance in the U.S. could be significant depending on its contents.”

Still, the resurgence of the pandemic is the “paramount issue and any fiscal measure likely only would prop up demand temporarily and possibly to a lesser extent than the pandemic lowers it,” said Steeves.

See : White House’s Kudlow says few signs of progress on fiscal stimulus talks

Oil prices had climbed Thursday , in part due to comments from Russia President Vladimir Putin. He said he sees no need for global oil producers to change their existing deal on global supply, suggesting that Russia is ready to continue with current output cuts, Reuters reported Thursday .

Traders Friday showed little reaction to the U.S. oil-rig count from Baker Hughes /zigman2/quotes/205323712/composite BKR +2.62% , which revealed a fifth-straight weekly increase . The data showed the number of active U.S. oil drilling rigs up by 6 to 211 this week.

Meanwhile, traders eyed election-related news as voters assessed the outcome of Thursday’s final presidential debate.

“The U.S. presidential election poses a clear choice on carbon and climate change,” said Steeves. Democrat Joe Biden would “cease fracking on public lands and move rapidly toward the transition to clean energy,” while a re-election of Republican President Donald Trump would “likely continue current policies that benefit oil and gas.”

“Biden would also like to have the U.S. rejoin the Paris Climate Accord, so the outcome of the election could have significant implications for the oil-and-gas industry,” he said.

Read: Here’s how the U.S. presidential election could shake up the oil market

Data released Wednesday from the Energy Information Administration had revealed a smaller-than-expected 1 million-barrel decline in U.S. crude supplies for the week ended Oct. 16, but gasoline stockpiles unexpectedly climbed.

Weak demand for for fuel has been a key concern in the oil markets since the travel-related disruptions from COVID-19 began earlier this year. The EIA reported that over the past four weeks ended Oct. 16, implied motor gasoline demand was down 8.7% from the same period a year earlier.

Read: What diesel demand and prices tell us about the economic outlook

On Nymex Friday, November gasoline shed 1.7% to $1.1389 a gallon, with prices logging a 2.6% loss on the week. November heating oil fell 0.8% at $1.1513 a gallon, settling down 2.4% for the week.

November natural gas settled at $2.971 per million British thermal units, down 1.2%. For the week, however, it was up 7.1%, with analysts attributing the sharp rise to forecasts for colder weather in the coming weeks.

/zigman2/quotes/205323712/composite
US : U.S.: NYSE
$ 19.21
+0.49 +2.62%
Volume: 5.18M
Dec. 1, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
3.74%
Market Cap
$19.37 billion
Rev. per Employee
$346,621
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