Amid the market turmoil, oil prices sank Friday morning during European trade, as President Trump’s positive test for COVID-19 weighed on investors at a time when crude prices are already struggling with excess supply.
While equities stabilized somewhat, crude fell, and kept falling.
Mid-morning on Friday, London time, both the Brent and WTI contracts were down about 3%, with the global benchmark, Brent, dipping below $40, at $39.77 per barrel. Both contracts are down more than 30% since the start of the year.
Trump’s positive test comes after White House aide Hope Hicks tested positive for the virus. The President and First Lady will now self-quarantine, although the status of the President’s symptoms is unclear.
Friday’s news adds to mounting uncertainty hanging over the oil markets, a proxy for the health of the global economy. Rolling lockdowns in the spring led to an initial hit in demand, while the ensuing financial crash dented demand for oil and gas to a degree that is without precedent.
This year, the International Energy Agency expects oil demand to fall by 8.4 million barrels per day compared with last year, a record drop. In fact, in September the IEA revised its expectations for demand downward, reversing earlier expectations that demand was recovering.
Meanwhile, as the death toll has surpassed 1 million and lockdowns are once again on the horizon from Jakarta to Madrid, long-term concerns about oil demand are mounting.
“The oil market is struggling to interpret the continuous rise of COVID-19 infections and the fact that total [deaths] exceeded 1 million this week,” said Rystad Energy senior oil markets analyst Paola Rodriguez-Masiu in a note on Thursday. “It is a scary number, and although we are now used to worsening pandemic news, such a milestone is not one to brush off easily.”
Meanwhile, oil output from the OPEC group of oil producers rose in September to 160,000 barrels per day, according to a monthly Reuters survey, after output was tightened earlier this year in an effort to keep prices balanced.
In other words, more oil supply has been added to a world that needs it less.
It’s been a tumultuous week for the oil and gas industry all around. On Wednesday, Shell announced it would lay off up to 9,000 workers by 2022, pitching the cuts as part of its targets to reach net-zero emissions by 2050, which will require a vast restructuring of its assets toward low-carbon projects.
And there are signs that oil demand may never return to its pre-pandemic levels. Earlier this month, S&P Global Platts predicted that the hit to the global economy and the change in consumer behavior because of the pandemic had reduced long-term oil demand by 2.5 million barrels per day.
All that bodes poorly for oil prices, which are expected to remain depressed until the end of 2021.