Oil extended losses after its biggest one-day drop in more than two months as growing doubts over the strength of the global demand recovery along with continued weakness in stocks soured market sentiment.
Futures in London fell 0.9% after dropping 5.3% on Tuesday to settle below $40 a barrel for the first time since June 15. Asia’s stalling demand recovery, the end of the U.S. summer-driving season and increased supply from the OPEC+ alliance all point to a grim short-term outlook for oil prices.
Crude has also been hurt by worsening U.S.-China relations and a retreat in global stocks, partially driven by concerns a Covid-19 vaccine may be delayed. The benchmark S&P 500 Index has fallen 7% over the last three sessions.
Brent crude’s break below $40 a barrel follows two months of the global benchmark largely holding between $42 and $45.
The coronavirus pandemic is still raging and Bank of America Merrill Lynch said it will take three years for oil demand to fully recover from the outbreak even if there’s a vaccine.
Brent for November settlement fell 0.9% to $39.42 a barrel on the ICE Futures Europe exchange as of 12:02 p.m. in Singapore
The global crude benchmark has fallen 13% this month
West Texas Intermediate for October delivery dropped 1.3% to $36.29 on the New York Mercantile Exchange
It lost 7.6% from end-Friday through Tuesday, with the contract not closing Monday due to a U.S. public holiday
While Abu Dhabi is cutting official crude pricing for October, following a similar Saudi move over the weekend, another bearish signal.