Oil drops below $35 on more pandemic lockdowns, Libyan supply

Oil fell for a fourth day as tightened lockdowns in Europe to curb a resurgence of coronavirus stoked demand concerns and as Libya ramped up its production toward 1 million barrels a day.

Futures in New York dropped as much as 4.8%, after falling 1.1% on Friday to round off its worst month since March. U.K. Prime Minister Boris Johnson announced a partial lockdown for England over the weekend, with most countries in western Europe already facing tougher restrictions. The pace of infections in the U.S. slowed on Saturday after two straight days of national records.

Libya’s daily crude output has reached 800,000 barrels and the country is targeting 1.3 million by the beginning of 2021, Mustafa Sanalla, the chairman of state-run National Oil Corp., said in an interview Saturday, as a truce in the nation’s civil war allows the state energy firm to ramp up operations at previously idled fields and ports.

Benchmark Brent crude fell 10% in the five days through Friday as daily Covid-19 cases hit a record in the U.S. and nations including France and Germany announced new lockdowns. The U.K. followed suit on Saturday.

Still, the world’s biggest independent oil trader Vitol Group is inclined to see recent price moves as just a “speed bump", with tightening global inventories likely to cushion the downside.

Drilling rigs targeting crude oil in the U.S. rose by 10 to 221 in the past week, according to Baker Hughes, the sixth straight weekly increase, suggesting activity is picking up despite risks to the demand recovery from the pandemic.

A potentially pivotal week lies ahead for the market with the U.S. presidential election on Tuesday as well as the latest Federal Reserve policy meeting starting Wednesday. Traders are also looking ahead to the next meeting of OPEC and its allies at the end of November, to see whether the bloc commits to proceeding with plans to add more supply from January in the face of fresh price weakness.