Oil fell a second day, dropping below $38 a barrel in New York, as a surging coronavirus and uncertain U.S. elections weighed on sentiment. Futures dropped 2.7%, with equity markets also lower as investors took risk off the market. Joe Biden appeared to be on the brink of victory in the presidential race — amid increasing numbers of legal complaints from incumbent Donald Trump — but he may have to deal with a split Congress. Mounting coronavirus cases, with America becoming the first country to top 100,000 cases in a day, are also dragging oil lower.
Crude is ending a rough week with a decline after gains in the first half as the demand outlook turns more grim. Refineries across the U.S. and Europe have shut as a result of the pandemic and traders continue to brace for high volatility. Even though Asia is a bright spot, the OPEC+ group is considering whether to extend its current production cuts into next year to prevent a market glut. “There is a definite negative sentiment in Europe and around the world at the moment, due to the restored lockdowns that are mushrooming across countries and regions,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
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As refiners continue to struggle, Royal Dutch Shell Plc said it will shut its 211,000 barrel-a-day Convent facility in Louisiana. It comes as the company plans to shrink its refining business after Covid-19 hammered global demand and profits. “It’s the pandemic not the U.S. elections that matter for oil in the near-term,” JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a report.