By Geoffrey Smith
Investing.com -- Crude oil prices slumped on Tuesday as fears resurfaced once again about the trajectory of global demand amid prospects of a full winter of coronavirus-driven restrictions on economic activity.
The declines were compounded by technical factors, which saw the international benchmark Brent fail to break through its 100-day moving average.
By 11:00 AM ET (1500 GMT), U.S. crude futures were down 3.3% at $39.25 a barrel, while Brent was down 2.8% at $41.66 a barrel.
While there appeared to be no single piece of news triggering the slump, the move came against a backdrop of worldwide coronavirus deaths topping 1 million, and U.S. Vice President Mike Pence – not one to exaggerate the threat of Covid-19 – warning that infection rates in the U.S. are likely to rise in the coming days.
Some of the world’s biggest oil traders said earlier Tuesday they saw difficult times ahead.
“"The picture doesn't look very good,” Torbjorn Tornqvist, chief executive of Gunvor, told a panel discussion hosted by Reuters, noting that the recent active buying by Chinese refiners had been excessive and had led to tankers lining up off the Chinese coast to discharge their cargoes.
Russell Hardy, CEO of the world’s biggest trading house Vitol, told the same event he had “modest expectations” for oil prices, seeing consumption staying broadly flat until next summer.
Marco Dunand, the founder and CEO of Swiss-based trading house, meanwhile said he doesn’t see oil consumption coming back to pre-pandemic levels for a few years.
At a meeting of G-20 energy ministers on Monday. OPEC Secretary-General Mohammed Barkindo had said that commercial stockpiles across developed countries are likely to stay well above historical averages for some time yet.
Barkindo said OECD crude stocks would be around 120 million barrels above five-year averages throughout the quarter, and will remain above average on a five-year view in the first quarter of next year, despite an expected decline.
Elsewhere, there was little sign of the market building in any geopolitical risk premium from the conflict between Armenia and Azerbaijan over the Nagorno-Karabak enclave. The region is only a few miles away from the route of the Baku-Tbilisi-Ceyhan pipeline which carries some 1.2 million b/d. There are no reports of shipments being disrupted.