Concern about demand due to Covid-19 pushes oil price towards $40 a barrel

London — Oil fell to near $40 a barrel on Friday as new lockdowns in Europe to halt surging Covid-19 infections sparked concern about the outlook for demand, while markets remained on edge over drawn-out vote counting in the US election.

Italy recorded its highest daily number of infections on Thursday and cases surged by at least 120,276 in the US, the second consecutive daily record as the outbreak spreads across the country.

Brent crude fell 60 US cents, or 1.5%, to $40.33 at 9.15am GMT. US West Texas Intermediate (WTI) dropped 59c, or 1.5%, to $38.20. Both contracts fell more than $1 earlier in the day.

Still, Brent was heading for a near 8% gain this week, having fallen in the previous two weeks.

“As market players clamour for election clarity, demand jitters are once again taking their toll on the energy complex,” said Stephen Brennock of broker PVM.

In the US election, Democratic candidate Joe Biden gained more ground on President Donald Trump in Georgia and Pennsylvania, edging closer to the White House hours after Trump falsely claimed the election was being “stolen” from him.

Diminishing prospects of a large US stimulus package were also weighing on the market.

“Any hope of a gargantuan US fiscal stimulus package is almost gone,” said Jeffrey Halley of brokerage Oanda. “Covid-19’s rampage across Europe and the US is likely to deliver a hit to consumption.”

Providing some support, Opec and Opec+ may delay bringing back two-million barrels per day of supply in January, given weaker demand from new lockdowns.

And US crude inventories plunged last week by eight-million barrels, against analyst expectations for an increase.

Reuters