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(Bloomberg) -- Oil fell to the lowest in three weeks as the threat of increased Libyan crude output added to concerns that a resurgence of the coronavirus will weaken the global economy.Futures in New York fell as much as 3.7% to below $39 a barrel on Monday. Libya’s daily output has risen to 690,000 barrels from less than 100,000 in early September, and the country is poised to restart the last of its major oil fields following a cease-fire in its civil war. Meanwhile, White House Economic Adviser Larry Kudlow said there are aspects of the Democrats’ stimulus bill that President Donald Trump can’t accept.At the same time, the U.S. reported back-to-back record virus infections over the weekend, while Italy approved a partial lockdown and Spain announced a national curfew as the coronavirus rages.“People underestimate Libya’s ability to get back online fully quickly,” said John Kilduff, a partner at Again Capital LLC. “This is 1 million barrels a day that the market can ill-afford. It’s a one-two punch today, with renewed Covid concerns as well.”More than half a year since the pandemic sent oil prices into a tailspin, the prospect of renewed lockdown restrictions is threatening to derail the fragile recovery in consumption. European diesel demand would drop by a quarter year-over-year and gasoline demand could fall by 30% year-over-year over a three-month period under a scenario that models a near-full scale lockdown, according to JBC Energy. Meanwhile, Saudi Arabia’s energy minister said at a conference on Monday that the oil market isn’t yet out of the woods, despite a strong recovery in recent months.See also: It’s Asia to the Rescue Again as Oil Demand Wavers Elsewhere“With the demand recovery still on a weak footing and increasing supply from Libya, it is becoming crucial that OPEC+ delay their scheduled production increases,” TD Securities commodity strategists including Bart Melek said in a note. “A failure to do so would endanger a fragile rebalancing amid a continued second wave.”The threat to demand posed by a resurgence of the pandemic displays the importance of another round of U.S. fiscal stimulus. But talks over a comprehensive virus aid package moved no closer to a resolution over the weekend, dimming prospects of a bill being passed before the election. Kudlow said stimulus talks will continue on Monday.Other areas of the market are pointing to further signs of weakness for crude. The spread between WTI’s nearest contracts weakened to its largest contango structure in about two weeks, signaling concerns of oversupply.A lack of commitment by OPEC+ producers to the group’s cuts could force the market to penalize them, Saudi Energy Minister Prince Abdulaziz bin Salman said at the Singapore International Energy Week 2020 on Monday. The oil market is going through “serious harsh times,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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