Lockdowns Sweep Across Europe

November 2, 2020 08:31 AM
New Covid restrictions are bad for oil demand
Libya is amping up production
Brent storage levels are increasing
Energy Report

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The Phil Flynn Energy Report 

Lockdown and Libya

Oil prices took a hit on the Sunday night opening on lockdowns and Libya, but amazingly enough, though, we are trying to rebound following a rally in stocks. Marketwatch reported that U..K. Prime Minister Boris Johnson announced a second national lockdown for England late Saturday, following France and Germany’s imposition of new restrictions in response to surging Covid-19 infections.

From Thursday through December 2, only essential businesses, schools, and universities will remain open in England, with bars, restaurants, and nonessential stores closed. Ahead of Johnson’s announcement, the European benchmark Stoxx 600 index hit its lowest level since the spring. At a press conference announcing the new restrictions, Johnson said trips outside people’s homes wouldn’t be allowed except for a specific purpose.

Lockdowns are inadequate for demand, and so is the resurgence of Libyan oil supply. Bloomberg reports that "Libya's oil production is rising rapidly toward 1 million barrels a day, as a truce in the nation's civil war allows the state energy firm to ramp up operations at previously idled fields and ports.” Daily crude output has reached 800,000 barrels, and the country is targeting 1.3 million by the beginning of 2021, Mustafa Sanalla, the chairman of state-run National Oil Corp., said in an interview Saturday in the eastern city of Brega.

The OPEC member was pumping less than 100,000 barrels a day in early September. Following an almost total shutdown in January as fighting in the war intensified, its production’s quick revival has taken oil traders by surprise. It's weighed on crude prices just as a resurgence of coronavirus cases hammers global energy demand. Benchmark Brent crude fell 10% last week to $37.46 a barrel, its lowest since May. Output at Libya's most significant field of Sharara, in the west, will rise to 245,000 barrels daily this week, said Nuri Esaid, chairman of Akakus Oil Operations, a company based in the capital of Tripoli. Sharara will pump around 300,000 barrels each day.

S&P Global reports that the floating storage levels of the Brent, Forties, Oseberg, Ekofisk, and Troll (BFOET) grades in Northwest Europe have edged up to their highest levels since the peak of Europe's coronavirus lockdown from March to June, according to data intelligence company Kpler.

China’s manufacturing activity expanded in October for the eighth straight month, though at a slightly slower rate than in September, the National Bureau of Statistics said Saturday. The Purchasing Managers’ Index stood at 51.4, down from 51.5 the previous month, the agency announced. A reading above 50 in the monthly survey of companies indicates expansion. The economy has gradually recovered since the index plunged to 35.7 in February during the peak of the coronavirus outbreak in China. The world’s second-largest economy grew 4.9% in the three months ending Sept. 30, the second straight quarter of growth after a contraction of 6.8% from January to March.

After a brief bounce-back in March and April, Manufacturing employment fell for the sixth straight month with a reading of 49.3, a decline from 49.6 in September. China has struggled to get people back to work even as the pandemic has receded mainly at home. The recovery has helped large manufacturers more than smaller ones, which fell into negative territory in October, dropping 0.7 to 49.4.

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About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.