Oil falls below $41 with surging Covid cases menacing demand - Houston Chronicle

Oil fell for a second day -- dropping below $41 a barrel in New York -- as the ongoing spread of coronavirus dampens the demand outlook.

As well as the ongoing surge in European coronavirus cases, there are also growing numbers in the U.S., Japan and South Korea, all of which are major oil consumers. This prompted both the International Energy Agency and the Organization of Petroleum Exporting Countries to revise down their demand estimates in their monthly reports as renewed lockdowns hit fuel use.

West Texas Intermediate crude fell 1.3% to $40.58 a barrel. Brent crude fell 1% to $43.11 a barrel.

Crude is still up about 10% this week, however, after news of a potential Covid-19 vaccine breakthrough spurred a sharp jump in global markets on Monday. Futures have also been supported by indications that the OPEC+ alliance is closing in on a deal to delay a planned easing of output cuts. Still, three of the world’s top central bankers warned that a vaccine wouldn’t be enough to put an end to the economic challenges created by the pandemic as the disease continues to spread further.

PREVIOUSLY: Oil drops on stockpiles rise, Fed warns of Covid risk

“There is a clear divergence in the oil demand recovery between Asia and Europe,” said Kevin Solomon, an analyst at brokerage StoneX Group. “We can assume that tighter lockdowns will resume in the United States ultimately crimping oil demand.”

In Asia, refiners are having to outbid one another to secure supplies in the spot market as buying interest from Chinese refiners grows. Meanwhile in Europe, where motorway traffic is down by almost 50% in some countries, demand is stuttering anew. That’s impacting crude, with six supertankers of unwanted North Sea oil continuing to float in the region.

Passive oil investors are also taking a more circumspect view on oil in the short-term. More than $460m has been pulled from the market’s largest exchange traded funds so far this week, according to data compiled by Bloomberg.

©2020 Bloomberg L.P.

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