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Oil Prices Pull Back as COVID Cases Rise Globally

Oil futures lost ground Thursday, with a continued rise in COVID-19 cases in the U.S. and around the world highlighting worries about crude demand and overshadowing positive news on the vaccine front.

Concerns about unity within the Organization of the Petroleum Exporting Countries were also a negative, analysts said.

West Texas Intermediate crude for January delivery, the most actively traded contract, was down 31 cents, or 0.7%, at $41.70 a barrel on the New York Mercantile Exchange. January Brent crude, the global benchmark, was off 12 cents, or 0.3%, at $44.22 a barrel on ICE Futures Europe.

Oil on Wednesday traded at the highest levels since early September. But analysts said new lockdowns in response to rising COVID-19 cases weighed on markets. New York City on Wednesday announced the closure of all public schools after the city’s positivity rate from virus tests reached a seven-day average of 3% — the threshold set to keep schools open.

The move comes as cases rise across much of the country, including rural and urban areas, putting strains on hospital systems.

A week ahead of Thanksgiving, experts estimate as much as a 45% drop in the number of holiday travelers compared with last year, even with Americans expected to pay the lowest gasoline prices for the season since 2016.

Meanwhile, analysts noted signs of rising tensions within OPEC+, the alliance between the cartel and other major producers. Bloomberg reported that officials from the United Arab Emirates, speaking on the condition of anonymity, questioned the benefits of being in the alliance.

Speculation this week has centered on whether OPEC+ would move at a Nov. 30-Dec. 1 meeting to extend existing output cuts or stick with a schedule that would ease those restrictions in January.

“Now it even seems that one of OPEC’s core countries, the UAE, is no longer willing to maintain the production cuts in view of the rise in production elsewhere,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.

With production also picking up in Russia, much will depend on Saudi Arabia, he said.

“If production discipline can be restored within the group, this would boost the market’s [confidence] in the alliance. That said, it is also possible that Saudi Arabia will react in much the same way as it did in March, meaning that another price war is possible,” he said, referring to a monthlong battle between Saudi Arabia and Russia that flooded the world with crude as the global economy nearly shut down in response to the COVID-19 pandemic.

Source: Marketwatch