Oil is heading for its largest monthly decline since March as a resurgent pandemic forces tighter restrictions, crimping demand for auto and aviation fuel.
Futures fell 0.5% in New York on Friday and have slumped almost 11% this month. Infections surged to a record in the US Midwest, while parts of Europe clamped down to slow down the spread.
Prices have fallen this week with signs that both road use and airline capacity in Europe have dwindled. Still, there’s some support from booming freight markets and improvements in China and India. All the while, traders are looking ahead to next week’s US election and an OPEC+ meeting at the end of November.
“The ebb and flow of risk appetite remains tied to Covid-related developments,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA. Stricter restrictions in Europe “need to be weighed against growing goods consumption channeled through e-commerce that is fueling diesel use in freight and delivery activities.”
The mixed signs on demand are also evident in France where a renewed lockdown is taking effect. Though use of motorways was down last week, data from TomTom NV show that traffic in Paris surged on Thursday night as people tried to leave the city.
However, despite the pockets of strength in demand, the overall outlook continues to be weak. BP Plc will cease fuel production at its Kwinana refinery in Australia, which can process 146,000 barrels a day. It follows the idling of a plant by PBF Energy Inc. in the US earlier in the week.
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