Oil slumps as Europe locks down

Oil was down on Monday morning in Asia, with rapid falls of over 4% as markets opened. European Covid-19 lockdowns took center stage over the weekend, and concerns over a potentially turbulent Nov. 3 US election continue to roil the market.

Brent oil futures fell 2.80% to $36.83 by 10:38 PM ET (2:38 AM GMT) and WTI futures slid 3.27% to $34.62.

The steep fall in oil prices when markets opened after a weekend of bad news was slightly pulled back later in the morning, however, markets still remained firmly down on last week.

Both Brent and WTI futures are now well under the $40 mark as the Covid-19-induced recession deepens, with the UK and Italy now added to France and Germany in the list of major European economies under severe measures. The rapidly rising number of U.S. coronavirus cases is also promoting worry about an even further expanded recession.

“The lockdown measures announced by the UK and by Italy are just adding to the deteriorating European situation. A lot of traders are now looking at the US and its rising infection rates and wondering if Europe is providing the model for what will happen in the US in the coming weeks.” CMC Markets chief market strategist Michael McCarthy told Reuters.

Markets are also eyeing the US presidential election with concern over possible disruptions. The Covid-19 pandemic has caused changes to voting practices that will cause vote tallying delays, and may lead to a premature declaration of victory, which would in turn lead to a bitter and drawn out legal fight over the final outcome.

Alongside the fall in demand are oversupply concerns, with Libya and Iraq boosting their production, causing a rise in overall supply from the Organization of the Petroleum Exporting Countries (OPEC), despite the group having reduced quotas across its other members.

OPEC+, a group comprising OPEC and other oil-producing allies, are scheduled to meet on Nov. 10 and Dec. 1 to discuss future policy. However, with 7.7 million barrels per day already cut from the group’s production, there is not a great deal of leeway for further reductions.

Norway is also looking to increase the production from the Johan Sverdup oilfield, its largest, after reduced production during the third quarter due to maintenance and technical issues.

First published on Investing.com