New lockdowns in Europe, US election uncertainty weigh on oil prices

Opec+ may delay tapering production cuts in January

US crude inventories plunged last week by 8 million barrels, against analyst expectations for an increase. Reuters

Oil fell below $40 a barrel on Friday as new lockdowns in Europe to halt surging Covid-19 infections sparked concern about the outlook for demand, while markets remained on edge over drawn-out vote counting in the US presidential election.

Italy recorded its highest daily number of infections on Thursday and cases surged by at least 120,276 in the United States, the second consecutive daily record as the outbreak spreads across the country.

Brent crude fell $1.15, or 2.8 per cent, to $39.78. US West Texas Intermediate (WTI) dropped $1.24, or 3.2 per cent, to $37.55.

Still, Brent was heading for a 6 per cent gain this week, having fallen in the previous two weeks.

“As market players clamour for election clarity, demand jitters are once again taking their toll on the energy complex,” said Stephen Brennock of broker PVM.

Diminishing prospects of a large US stimulus package were also weighing on the market.

“Any hope of a gargantuan US fiscal stimulus package is almost gone,” said Jeffrey Halley of brokerage Oanda. “Covid-19’s rampage across Europe and the US is likely to deliver a hit to consumption.”

Providing some support, the Organisation of the Petroleum Exporting Countries and allies including Russia, a group known as Opec+, may delay bringing back 2 million barrels per day of supply in January, given weaker demand from new lockdowns.

US crude inventories plunged last week by 8 million barrels, against analyst expectations for an increase.