Oil dips on demand worries as COVID-19 lockdowns tighten
Oil prices edged down on Tuesday as tighter lockdowns in Europe and an OPEC forecast for a slower recovery in demand next year outweighed relief from the roll-out of coronavirus vaccines.
U.S. West Texas Intermediate (WTI) crude futures fell 18 cents, or 0.38%, to $46.81 a barrel by 0737 GMT. Brent crude futures fell 20 cents, or 0.4%, to $50.09 a barrel.
London stepped up restrictions requiring bars and restaurants to close, as COVID-19 infection rates continued to rise sharply, which will dent fuel demand in the near term.
Further marring the demand outlook, Italy said it was considering more stringent restrictions over the Christmas holidays, while most stores in Germany have been ordered to shut until Jan. 10.
“While the market has been buoyed by the roll-out of COVID-19 vaccines, a path towards normalisation of demand remains a difficult one,” ANZ analysts said in a note.
OPEC on Monday pared its forecast for a recovery in oil demand in 202l by 350,000 barrels per day, due to the persistent impact of the pandemic, but said a rapid roll-out of vaccines in major economies “provides potential upside for next year’s growth forecast”.
In a sign of weaker demand, analysts expect data from the American Petroleum Institute on Tuesday and the Energy Information Administration on Wednesday to show that U.S. gasoline inventories rose by 1.6 million barrels last week, and that distillate inventories, which include diesel and heating oil, rose by 400,000 barrels.
On the supply side, U.S. oil output from shale formations is expected to decline by about 136,000 barrels per day (bpd) in January to 7.44 million bpd, the lowest since June, the U.S. Energy Information Administration (EIA) said in a monthly forecast on Monday.