Oil back near $50 a barrel as Covid-19 curbs take toll

London — Oil slipped towards $50 a barrel on Tuesday as tighter lockdowns in Europe and forecasts of a slower demand recovery outweighed relief from the rollout of coronavirus vaccines.

London stepped up pandemic restrictions requiring bars and restaurants to close, Italy is considering more stringent steps over Christmas and Germany is likely to be under lockdown until early 2021.

Brent crude fell two US cents to $50.27 a barrel at 9.10am GMT. US West Texas Intermediate (WTI) crude was up 2c at $47.01.

“It seems that the market is facing some kind of reality check as the initial euphoria of vaccine developments is subsiding,” said Tamas Varga of oil broker PVM.

Oil has recovered in recent weeks, with Brent reaching $51.06, its highest since March, on December 10, supported by hopes of demand recovery. Prices tanked to historic lows in March as the pandemic took hold.

But in a reminder that the immediate outlook is for further weakness, the International Energy Agency on Tuesday trimmed its demand estimates and said that any vaccine impact on demand for fuel was several months away.

On Monday, Opec had said oil demand would rise more slowly than expected in 2021. The group and its allies, known as Opec+, also delayed meetings planned for this week until early January.

“There is a growing agreement between forecasting agencies that the improvement in global oil demand might not start at the beginning of next year but in the second half,” Varga said.

The latest snapshots of US oil supplies are expected to show a mixed picture, with petrol and distillate stocks rising and crude inventories falling.

The first of this week’s two US inventory reports, from the American Petroleum Institute, is due at 9.30pm GMT. 

Reuters