Oil prices slipped on Thursday as new restrictions to stem a surge in COVID-19 infections increased uncertainty over the outlook for economic growth and a recovery in fuel demand. But prices bounced off their lows after better-than-expected inventory data.
Traders noted the price decline was limited by industry data showing a fall in U.S. oil inventories last week. The U.S. Energy Information Administration said Thursday that inventory declined by 3.818 million barrels in the prior week, larger than the 1.9 million barrel draw analysts polled by FactSet had been expecting.
The American Petroleum Institute industry group on Wednesday said U.S. crude, gasoline and distillate inventories all fell in the week to Oct. 9.
Some European countries are reviving curfews and lockdowns to try to contain the rise in new coronavirus cases, with Britain expected to impose tougher COVID-19 restrictions on London from midnight on Friday.
"If demand weakens noticeably, OPEC+ will have no choice but to call off its production increase if it does not want to risk a renewed oversupply and another price slide," Commerzbank said.
OPEC and its allies, together called OPEC+, are due to taper production cuts by 2 million barrels per day (bpd), from 7.7 million bpd currently, in January.
OPEC+ had 102% compliance with its agreement to cut oil supply in September, two OPEC+ sources told Reuters ahead of a technical committee meeting on Thursday.
The group will ensure oil prices do not plunge steeply again when it meets to set policy at the end of November, OPEC's Secretary General said, adding that demand has been recovering more slowly than expected.
Top global oil traders Vitol, Trafigura and Gunvor said they saw slow oil demand recovery because of a second coronavirus wave with oil prices rising to or above $50 per barrel only by October next year.
"Toxic brew of COVID-19 lockdowns, especially in Europe, and the apparent end of any hopes for a U.S. stimulus deal before the election are weighing on risk assets," said Bob Yawger, director of energy futures at Mizuho in New York.