(Bloomberg) – Oil is heading for its biggest monthly drop since March as concerns grow that a new pandemic in the United States and Europe will keep people curled up, slowing demand for automotive and aviation fuel.
Futures rose slightly on Friday but are on track for a 7.8% drop this month. Infections hit a record high in the US Midwest, while parts of Europe have tightened restrictions to stem the second waves.
West Texas Intermediate crude was little changed at $ 36.16 per barrel.
As prices have fallen this week, there are signs that road use and airline capacity in Europe have declined. Still, it’s a melodic picture for consumption, where booming freight markets and improvements in China and India could still offer a lifeline. All the while, the market is eyeing next week’s US election and an OPEC + meeting at the end of November.
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“The ebb and flow of risk appetite remains linked to developments related to Covid,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA. “The reintroduction of more stringent protocols in Europe that will affect the mobility of people must be balanced against the increasing consumption of goods delivered through e-commerce which is fueling the use of diesel in freight and delivery activities.”
While freight is a bright spot for demand in Europe, there are also mixed signs from France where a new lockdown is taking effect. Although the use of freeways declined last week, data from TomTom NV shows that traffic in Paris increased on Thursday evening as people tried to leave the city. This is just a sign that the impact of the new lockdowns on consumption could be mitigated.
The darker outlook for demand continues to weigh heavily on the refining industry. BP Plc will cease fuel production at its Kwinana refinery in Australia, which can process 146,000 barrels per day. This follows a plant idling by PBF Energy Inc. in the United States earlier in the week.
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