Oil dips as rise in Covid-19 cases stokes demand fears

Melbourne — Oil prices eased on Friday but stayed within touching distance of nine-month highs hit overnight as soaring Covid-19 cases weigh on fuel demand and US legislators continue to battle over a $900bn economic stimulus package.

US West Texas Intermediate (WTI) crude futures slipped 7 US cents, or 0.1%, to $48.29 a barrel at 2.18am GMT, while Brent crude futures fell 13c, or 0.3%, to $51.37 a barrel.

Both contracts had climbed on Thursday, on optimism about progress on a Covid-19 relief bill, strong Asian refining demand and a slide in the US dollar to a two-and-a-half year low. With oil priced in dollars, a weaker greenback makes oil cheaper in other currencies.

“We think markets are still overlooking the near-term demand pressures of rising Covid-19 cases and Covid-19 restrictions in the US and Europe,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

Analysts said risk appetite was growing with the prospect of an imminent US stimulus deal, which would help fuel demand, but legislators had yet to reach an agreement late on Thursday.

The continued rollout of vaccines is also helping protect the market from steep falls.

The US Food and Drug Administration was expected to grant emergency-use authorisation for Modern’s coronavirus vaccine after emergency use was endorsed by an independent panel.

ANZ Research said with US Covid-19 infections hitting new daily records, and restrictions tightening in Japan, pressure is growing on Opec, Russia and their allies, together called Opec+.

Opec+ plans to add 500,000 barrels per day (bpd) of supply to the market in January, in the first step towards returning 2-million bpd to the market.

“While rising consumption in Asia and demand hopes linked to a Covid-19 vaccine may help oil prices above this range ($50-$60 a barrel), we think Opec+ sits on enough spare oil capacity to keep any surge in oil prices in check,” Dhar said.

Reuters