Thursday 1 October 2020 4:50 pm

Global oil prices plunge over fresh demand fears

Global oil prices dropped sharply this afternoon amid fears that the continuing rise in coronavirus cases would drive demand down again.

Worldwide standard Brent crude lost 5.2 per cent to trade at $40.05, while US benchmark West Texas Intermediate dropped six per cent to stand at $37.75.

Read more: Premier Oil seeks to lower price of BP purchases for a second time

Earlier this week, the number of people who have died from the disease around the world passed 1m, with infections continuing to climb.

As a result, governments are bringing back more extreme lockdown restrictions in a fresh threat to the nascent economic recovery.

In addition oil producer cartel Opec said that output had increased by 160,000 barrels a day in September, further heaping downward pressure on the market.

The rise was largely on the back of higher supplies from Libya and Iran, both exempt from an oil supply pact between OPEC and allies led by Russia, a grouping known as OPEC+.

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Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu said that the recovery in the first half of the year had now been “muted”.

“Amid the rise of infections and Covid-19’s second wave, thinking of the restrictions that are being put in place again and of the ones that are coming, traders see oil demand as fragile.

“Indeed, the recovery that started in the first half is now muted and we may see some production needing to be sent to inventories in 2020’s last quarter.

“While demand struggles to keep up, supply is rising. OPEC+ has not decided to amend its cuts to address the worsening market situation, even though it is surely monitoring it.”

Read more: Oil prices reverse losses as Opec cracks down on over production

Today’s sharp price fall raises the spectre of April’s historic price volatility, in which prices flipped into the negative for the first time in history.

Since then prices have trended upwards to stand at roughly two-thirds of pre-pandemic levels.