Oil falls over 3% as virus cases mount and US debate looms

[NEW YORK] Oil prices fell over 3 per cent on Tuesday to their lowest in two weeks on worries about the outlook for fuel demand as Europe and the United States grappled with a surge in new coronavirus infections.

Investors in stocks and commodities also remained cautious ahead of the first US presidential debate between Democrat Joe Biden and Republican Donald Trump later on Tuesday.

"Today's lower trade generally followed declines in the equities," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

On its second to last day as the front-month, Brent futures for November delivery fell US$1.40, or 3.3 per cent, to settle at US$41.03 a barrel, while the more active Brent contract for December fell 3.1 per cent to settle at US$41.56.

US West Texas Intermediate (WTI) crude fell US$1.31, or 3.2 per cent, to settle at US$39.29 per barrel.

Those price declines came ahead of the release of US oil inventory data from the American Petroleum Institute (API) on Tuesday and the US Energy Information Administration (EIA) on Wednesday that is expected to show crude stockpiles increased 1.6 million barrels last week.

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More than a million people worldwide have died from Covid-19, according to a Reuters tally, a bleak milestone in a pandemic that has devastated the global economy and demand for fuel.

New York City will impose fines on people who refuse to wear a face covering as the rate of positive coronavirus tests climbed above 3 per cent for the first time in months, Mayor Bill de Blasio said on Tuesday.

"The evolving Covid landscape is a massive downside risk for crude prices," said Craig Erlam, senior analyst at Oanda.

The heads of the world's largest trading houses predicted tepid oil demand recovery and flat prices in the coming months and possibly even years.

Clashes between Armenia and Azerbaijan over the Nagorno-Karabakh region have also kept markets on edge. If the conflict escalates, it could affect oil and gas exports from Azerbaijan.

In Libya, meanwhile, the Sarir oilfield has restarted production, the head of the company that operates it said on Tuesday, after eastern forces lifted an eight-month blockade on energy facilities.

REUTERS