Oil falls despite hopes of Covid vaccine

Tokyo — Oil prices fell on Friday, pressured by fears about a slow recovery in the global economy and fuel demand due to an accelerating rise in Covid-19 infections, but remained on track for a second straight weekly gain, helped by vaccine hopes.

Brent crude was down 75c, or 1.7%, at $42.78 a barrel at 3.14am GMT, after dropping 0.6% on Thursday. US West Texas Intermediate (WTI) crude futures fell 89c, or 2.2%, to $40.23 a barrel, having lost 0.8% on Thursday.

For the week, both were headed for a surge of about 8%.

US government data also added pressure, as crude inventories rose by 4.3-million barrels last week, compared with an expected fall of 913,000 barrels.

“Investors took profits from the recent rally as a gloomy global economic outlook dampened sentiment amid a sharp increase in coronavirus cases and new social restrictions,” said Koichi Murakami, an analyst at Daiichi Commodities.

“Oil prices are expected to stay under pressure next week if the spread of the pandemic continues to accelerate in many parts of the world,” he said.

New coronavirus infections in the US and elsewhere are at record levels and tightening economic restrictions to contain the spread have dampened the prospect of a near-term end to the global health crisis.

Hopes that such a resolution might be on the horizon have risen this week — stoking the jump in both WTI and Brent contracts — after data showed an experimental Covid-19 vaccine being developed by Pfizer and Germany’s BioNTech was 90% effective.

But the International Energy Agency (IEA) said on Thursday that global oil demand is unlikely to get a significant boost from the rollout of vaccines against Covid-19 until well into 2021.

“Views that it would take time to see any benefit from a Covid-19 vaccine prompted investors to unwind their long positions,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi, adding chart analysis suggests WTI is headed towards $39.5 a barrel.

Analysts say tougher restrictions on mobility to deal with skyrocketing coronavirus cases mean Opec and its allies, known as Opec+, may hesitate to implement a planned loosening of output curbs agreed in a deal earlier this year.

“The market has largely discounted a likely delay in tapering of cuts,” Saito said.

Reuters