Oil prices took another dive on Thursday, with the price of WTI falling more than 6% by late morning as OPEC’s production increased in September over August. Spot prices for WTI had fallen by 6.04% to $37.79, while Brent had dropped 5.22% to $40.09. The catalyst for this morning’s price drop is OPEC+’s September seaborne exports, which jumped to 22.84 million barrels per day from the 22.11 that the cartel exported by sea in August.
For OPEC specifically, its exports rose from 17.53 million bpd in August to 18.2 million bpd in September. A Reuters survey shows that OPEC’s production for September was up 160,000 bpd from the previous month. OPEC is still in compliance. The culprits for this production increase is mostly Iran and Libya, both of whom are exempt from the production quotas. The market is interpreting this production increase as a viable threat to any oil market re-balancing.
Further pressuring oil prices is the ever-present demand question—a metric that has been constantly pushed down by the pandemic. Bearish demand factors include another round of major airline layoffs affecting tens of thousands of employees, an impromptu lockdown of Madrid due to increasing coronavirus cases, and disappointing vaccine news—two separate vaccine trials have resulted in unpleasant side effects, including high fever, body aches, bad headaches, and exhaustion, just to name a few.
While the vaccine news isn’t a death knell for either vaccine, they may reduce the number of people willing to sign up for the vaccine if either of these are ultimately approved.
It is the vaccine that OPEC has pointed to in a meeting on Thursday as the lynchpin to stabilizing the oil market and swiften “the pace of economic recovery.”
