Business

Oil prices decline as Europe face fresh lockdowns

10 Nov 2020

Picture used for illustrative purpose. File

Gulf Today Report

Oil prices fell on Tuesday as worries over near term fuel demand in coronavirus-hit Europe and the United States haunted the market after an overnight surge driven by encouraging news on a COVID-19 vaccine.

US West Texas Intermediate (WTI) crude futures fell 55 cents, or almost 1.4%, to $39.74 a barrel by 0545 GMT, Brent crude futures fell 44 cents, or 1%, to $41.96.

The two benchmarks surged by 8% on Monday, the largest daily gain in more than five months. The gain was due to drugmakers Pfizer and BioNTech announcement of an experimental COVID-19 vaccine being 90% effective.

In a note, JP Morgan said a successful vaccine will switch things up for oil- a market where half of the demand comes from moving people and things around.

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"But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise,” he added.

Rystad Energy said fresh lockdowns in Europe due to the surge in coronavirus could lead to loss of a further 1 million barrels per day of oil demand by the end of the year.

The decline on Tuesday was due to a comment passed on Monday which stated that OPEC+ might be tweaking their supply cut pact if demand falls before the vaccine is available.

OPEC+ has conceded to reducing the supply by 7.7 million barrels per day from August through December and then reduce to 5.7 million bpd from January.