Last time Europe started shutting down, the oil price tanked. Not long after, futures contracts in the US reached negative territory due to a lack of storage space, and producer earnings crashed. Conditions are not as dire as in March and investors are now much more cautious about oil, but the actual risks are similar. Of course, the first shutdown covered a far greater area than just Europe, but these new restrictions will have an impact on oil demand.
In recent weeks, oil has been stuck in a fairly narrow range as traders try to gauge the demand hit as citizens across Germany, the UK and France stay at home. There is also the prospect of further lockdowns in the US to stop rising cases there.
Between the last week of October and the start of November, Brent crude bounced between $37 and $42 a barrel (bbl). The biggest drop came after the lockdown announcements, which arrived just as Libya was ramping up supply. The North African nation has increased production sharply, and consultancy Rystad Energy sees output going from an average 375,000 barrels of oil per day (bopd) in October to 750,000 bopd in November and 1m bopd by February.