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UPDATE 9-Oil drops 3% on weak demand outlook and higher OPEC supplies

Thu, 1st Oct 2020 06:46

* Rising COVID-19 cases dampen demand outlook

* OPEC output rises 160,000 bpd in Sept -Reuters survey

* Libya's oil output rises to 270,000 barrels per day
-source

* Seaborne crude shipments by OPEC+ group rose in Sept-IHS
Markit
(New throughout, updates prices, market activity and comments
to settlement)

By Devika Krishna Kumar

NEW YORK, Oct 1 (Reuters) - Oil prices fell 3% on Thursday
as rising coronavirus cases around the world dampened the demand
outlook, and a rise in OPEC output last month also pressured
prices.

Brent crude futures fell $1.37, or 3.2%, to settle
at $40.93 a barrel after dropping to a low of $39.92. U.S. West
Texas Intermediate (WTI) crude futures ended down $1.50,
or 3.7%, at $38.72 after sliding more than 6% to a session low
of $37.61.

"It has become evident that the virus has not been
contained. Infection rates are going up, the global death toll
has surpassed the 1 million mark and the world is becoming a
gloomy place once again," said PVM Oil analyst Tamas Varga.

In the United States alone the pandemic has infected more
than 7.2 million and killed more than 206,000.

Europe's worst COVID-19 hot spot, Madrid, will go into
lockdown in coming days and Moscow's mayor ordered employers to
send at least 30% of their staff home, as several European
countries reported records in new infections.

Standard Chartered analysts said they now expect global
demand to fall 9.03 million bpd in 2020 and recover by 5.57
million bpd in 2021, leaving the 2021 average slightly below the
2016 average.

"Today's trade is sending off some strong bearish vibes
given the selloff across the energy complex that is developing
despite a significant lift in risk appetite and weakening U.S.
dollar," said Jim Ritterbusch, president of Ritterbusch and
Associates.

Increasing oil supply from the Organization of the Petroleum
Exporting Countries (OPEC) also weighed on the market, with
output in September up 160,000 barrels per day (bpd) from
August, a Reuters survey found.

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+.

Libya's oil output has risen to 270,000 bpd as the OPEC
member ramps up export activity following the easing of a
blockade by eastern forces, a Libyan oil source told Reuters on
Thursday.

"New Libyan barrels, and reports that Russia has been
overproducing, had bulls on their heels earlier in the week.
Reports today that Saudi Arabia had increased exports in
September by 500,000 bpd seemed to be the final straw," said Bob
Yawger, director of energy futures at Mizuho.

OPEC members shipped out 18.2 million bpd in September, up
from the 17.53 million bpd exported in August, data from IHS
Markit Commodities at Sea showed, with Saudi Arabian exports
returning to levels above 6.25 million bpd.

Earlier in the session, prices received some respite from
progress in U.S. talks on a stimulus package for the world's
biggest economy.

U.S. President Donald Trump's administration has proposed a
new stimulus package worth more than $1.5 trillion.
However, U.S. House Speaker Nancy Pelosi and Treasury
Secretary Steven Mnuchin remained far from agreement on COVID-19
relief in several key areas on Thursday, after a phone
discussion failed to bridge what Pelosi described as differences
over dollars and values. Congressional Democrats led by Pelosi
have proposed a $2.2 trillion package to respond to the
pandemic.
(Reporting by Devika Krishna Kumar in New York
Additional reporting by Ahmad Ghaddar in London, Sonali Paul in
Melbourne and Seng Li Peng in Singapore
Editing by David Gregorio and Matthew Lewis)

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