Oil extended its decline below $39 a barrel in New York, heading for the first monthly loss since April, as the world’s biggest trading houses signaled a meaningful recovery in demand is some way off.

Oil extends losses on uncertain demand outlook

Oil sank below $40 on Tuesday as a surge in coronavirus cases across major economies stoked demand concerns. The U.S. benchmark crude also ran into technical weakness, sliding below its 100-day moving average for the first time since June. On the supply side, the market faces rising output from Libya and the rest of OPEC+, with Russia the latest member likely to exceed its quota.

“Concerns about stagnating demand and the return of Libyan exports continue to put pressure on oil prices,” said Norbert Ruecker, head of economics at Julius Baer. “Given the bearish mood, short-covering has become a risk to watch.”

PRICES
  • West Texas Intermediate for November delivery fell 1% to $38.89 a barrel as of 10:22 a.m. London time
    • Futures are down almost 9% this month
  • Brent for November settlement, which expires Wednesday, retreated 1.3% to $40.50

Total U.S. crude stockpiles dropped by 831,000 barrels last week, while inventories at the storage hub of Cushing expanded by 1.61 million barrels, according to the API. Gasoline supplies rose by 1.62 million barrels, which would be the first increase in eight weeks if confirmed by the Energy Information Administration on Wednesday.