Oil futures fell Monday, undercut by continued demand worries as the Organization of the Petroleum Exporting Countries further reduces its outlook for demand growth. Losses may be limited, however, as another storm threatens to temporarily limit production in the Gulf of Mexico.
West Texas Intermediate crude for October delivery CL.1, -0.72% fell 30 cents, or 0.8%, to $37.03 a barrel on the New York Mercantile Exchange, while the global benchmark, November Brent BRN00, -0.77% was off 27 cents, or 0.7%, at $39.56 a barrel on ICE Futures Europe.
OPEC, in its monthly report on Monday, said it now expects 2020 oil demand to contract by 9.5 million barrels a day to 90.2 million barrels a day, versus its previous call for a 9.1 million barrel-a-day fall. It also lowered its outlook for demand growth in 2021, citing the lingering effects of the coronavirus.
Also weighing on prices, analysts said, was a report by Reuters that Libyan commander Khalifa Haftar plans to halt a blockade of the oil-exporting nation’s ports.
“Unquestionably, this could put OPEC+ in an even more giant pickle when they hold a virtual meeting on Thursday to review the current production intervention level’s price impacts,” said Stephen Innes, chief global markets strategist at AxiCorp. “But one can be assured the cartel will not be happy to witness markets building a steeper contango since the last meeting.”
A contango occurs when deferred contracts are priced at a premium to nearby prices.
Meanwhile, some Gulf of Mexico oil producers were seen idling production over the weekend as they prepared for Tropical Storm Sally, which forecasters said could hit the New Orleans area this week as a Category 2 hurricane.