Oil prices were little changed early Friday were on track to book a large fall for the month as rising COVID-19 cases in the U.S. and Europe pose a renewed threat to demand.
West Texas Intermediate crude for December delivery was down 1 cent at $36.16 a barrel on the New York Mercantile Exchange. January Brent crude, the global benchmark, was off 8 cents, or 0.2%, at $38.18 a barrel on ICE Futures Europe.
Based on activity in the most actively traded contracts, WTI was headed for a monthly loss of 10.2% while Brent was down 9.9%, according to FactSet.
A large chunk of those declines came this week, with pressure tied largely to worries that a rise in COVID-19 cases that forced additional restrictions on activity in European countries and saw the daily number of new U.S. infections hit a record on Thursday will dent demand for crude.
Weakness in oil has accompanied heightened volatility across financial markets. The drop in oil comes as U.S. stock-market benchmarks head for big weekly losses tied to COVID-19 concerns and uncertainty ahead of Tuesday’s U.S. elections.
The fall in crude prices, which has seen Brent drop back below the important $40-a-barrel threshold, is seen putting pressure on the Organization of the Petroleum Exporting Countries and its allies to take action ahead of a planned relaxation of output curbs in January.
But analysts questioned whether actions by the OPEC+ alliance would be able to stem the pressure.
“Announcing that the voluntary production cuts will be left in place would have little impact in view of the persistently weak demand and negative sentiment,” said Eugen Weinberg, analyst at Commerzbank, in a note.
“If further cuts were announced, OPEC+ would risk losing its credibility. After all, given the increase in production elsewhere — be it in Brazil, the U.S. or particularly in Libya — the ‘OPEC+’ countries are hardly likely to voluntarily reduce their production further.,” he said. “We therefore see OPEC+ as powerless at present, meaning that the oil price is likely to remain for the most part in the pull of the financial markets.”