Oil futures traded slightly lower Thursday, pausing this week’s rally as concern over rising COVID-19 cases overshadowed optimism around progress toward a vaccine against the disease.
Also, the International Energy Agency further cut its outlook for crude demand in a monthly report, as traders awaited weekly data on U.S. crude inventories.
West Texas Intermediate crude fell was off 4 cents, or 0.1%, at $41.41 a barrel on the New York Mercantile Exchange. January Brent crude, the global benchmark, was off 11 cents, or 0.3%, at $43.69 a barrel on ICE Futures Europe.
Oil is witnessing “something of pullback amid some profit-taking after the moves on Monday/Tuesday,” said Stephen Innes, chief global markets strategist at Axi, in a note. “But it seems to be the case across all assets which are showing signs of vaccine trade fatigue. ”
WTI is up more than 11% so far this week, while Brent has gained around 10.8%, after rallying sharply on Monday and Tuesday after Pfizer Inc. and BioNTech SE said their COVID-19 vaccine candidate proved more than 90% effective in preventing infections in a trial.
But with distribution of a vaccine still likely months away, analysts said the focus has shifted toward the continued surge in cases.
The U.S. saw a record of 142,755 new COVID-19 cases on Wednesday, and at least 1,431 people died, according to a New York Times tracker. In the last week, the U.S. has averaged 128,081 cases a day, up 69% from the average two weeks ago, with cases rising in 49 states and territories.
Meanwhile, the International Energy Agency on Thursday deepened its forecast drop in oil demand for 2020 by 400,000 barrels a day to 8.8 million barrels a day, citing resurgent COVID-19 infection rates in the U.S. and Europe. The cut comes after the Organization of the Petroleum Exporting Countries on Wednesday cut its forecast by 300,000 barrels a day.
The IEA also cut its demand forecasts for the third and fourth quarters of 2020 as well as the first quarter of 2021, while estimating a supply increase of more than a million barrels per day in November.
Domestic supply data will also be in focus when the Energy Information Administration releases its weekly inventory data Thursday morning, delayed by a day due to the Veterans Day holiday on Wednesday.
Late Tuesday, the American Petroleum Institute, an industry trade group, estimated that U.S. crude supplies declined by 5.1 million barrels for the week ended Nov. 6, according to sources. The data also reportedly showed gasoline stockpiles down by 3.3 million barrels, while distillate inventories fell by 5.6 million barrels. Crude stocks at the Cushing, Okla. storage hub, meanwhile, edged down by 1.2 million barrels for the week, sources said.
The EIA’s more closely followed data are expected to show crude inventories down by 3 million barrels last week, according to analysts polled by S&P Global Platts. They also forecast supply declines of 600,000 barrels for gasoline and 2 million barrels in distillates.