Oil drops nearly 2% on demand concerns, snaps 2-week win streak

Oil pumping jacks, also known as "nodding donkeys", operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil fell nearly 2% on Friday and headed for a weekly drop as demand concerns raised by surging coronavirus cases in the United States and Europe overshadowed the prospect of an extension to OPEC-led supply curbs.

Italy and several U.S. states reported record daily increases in infections, while France extended curfews for about two thirds of its population as the second wave of the COVID-19 pandemic sweeps across Europe.

Brent crude lost 69 cents, or 1.63%, to settle at $41.77 a barrel. U.S. crude shed 79 cents, or 1.94%, to settle at $39.85 per barrel.

"What's holding us back is the uncertainty about demand - when we're going to get a vaccine, when things are going to get back to normal, concerns about more shutdowns versus concerns about tightening supplies," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also weighing on the market, Libyan output, which had been mostly offline since January, has reached 500,000 barrels per day (bpd) and will rise further by the end of October.

Comments by Russian President Vladimir Putin on Thursday that Moscow did not rule out extending OPEC+ oil output cuts supported oil prices.

"The only bullish piece of news comes from Russia," said Bjornar Tonhaugen of Rystad Energy.

OPEC+, a group that includes Russia and the Organization of the Petroleum Exporting Countries, is due to increase production by 2 million bpd in January 2021 as part of a plan to pump more as demand recovers.

However, the second wave of the pandemic and resulting slowdown in the demand recovery have raised the question of whether the increase is premature.

OPEC+ made a record supply cut from May, which boosted prices from historic lows. Brent is up from a 21-year low below $16 in April.