US, Europe Restrictions Plunge Crude Oil Prices
By Adedapo Adesanya
Oil prices were pointing down on Tuesday as concerns over tightened restrictions in the United States and Europe outweighed the start of vaccination in the UK and the certainty about the OPEC+ production at least for January.
As a result, the Brent crude dropped 12 cents or 0.25 per cent to sell at $48.67 per barrel while the West Texas Intermediate (WTI) lost 35 cents or 0.76 per cent to trade at $40.41 per barrel.
After rising for most of the past three weeks, due to hopes of a vaccine-induced boost in economic growth and energy demand, oil prices have been down this week.
This is because near-term demand concerns outweigh hopes for the demand outlook in a few months.
The US is now seeing a rise in hospitalisations by almost 2,000 a day and is averaging around as many deaths as during first COVID-19 surge in April.
France is set to miss a goal to end its lockdown next week. The European giant is unlikely to reduce new daily infection numbers to below 5,000 by December 15, the target set by the government as a reason to lift the lockdown on that day while the Bavaria region in Germany is moving into a stricter lockdown until January 5.
Tuesday’s outcome indicated that support from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) may have been relegated to the sidelines. The group had agreed to reduce supply for next month by half a million in contrast to the earlier volume agreed in April 2020.
Despite the environment, the market will be looking at happenings in the UK, which started its first COVID-19 vaccinations on Tuesday.
Also, there are signs that European demand is recovering after a renewed wave of lockdowns with countries like Poland recording improved road use and fuel consumption.
The market is also looking at renewed tension between China and US after the latter announced sanctions against 14 members of China’s National People’s Congress, the country’s rubber-stamp legislature, as the Trump administration tries to put pressure on the Asian country over its crackdown on dissent in Hong Kong.
Libya has continued to ramp up production just as Iran prepares to raise oil exports in a sign the Islamic Republic expects the US to ease some sanctions under a Joe Biden presidency.