Oil Slips over Soaring Coronavirus Cases & Lockdowns

Oil prices declined on Tuesday, adding to losses from the previous session. California tightened its pandemic lockdown through Christmas. COVID-19 cases continued to surge across the United States and Europe.

Brent crude futures slipped 40 cents, or 0.8%, to $48.39 a barrel at 0455 GMT. U.S. West Texas Intermediate (WTI) crude futures was down 35 cents or 0.8%, to $45.41 a barrel. Both benchmark contracts were down around 1% on Monday.

Globally, a sharp increase in COVID-19 cases has led to a string of fresh lockdowns. That includes strict measures in the U.S. state of California. Germany and South Korea have imposed their own measures to contain the surge. 

The pandemic situation continues to be very disruptive in quite a few places in the U.S. and parts of Europe. That’s impacting sentiment on demand near term. This was a statement from National Australia Bank (OTC:NABZY)’s head of commodity research.

On Monday, California required most of the state to close shop and stay at home. That is under a new order to last at least three weeks.

Stephen Innes, chief market strategist at Axi said, California will be in lockdown lite. That is through what is bound to be a Christmas lit for the oil markets. California is one of the U.S. largest road fuel demand states.

In France, government sources said the country may have to delay unwinding some lockdown restrictions next week. The decision came after signs the downward trend in new cases had flattened after shops were allowed to reopen last month.

New Economic Stimulus Package

Following last week’s oil price rally, analysts were hoping for an approval of  a new economic stimulus package. That was on the back of vaccine rollout plans and an OPEC+ agreement to hold back supply increases.

The stimulus will be necessary to drive job growth. In turn, energy demand.

ANZ Research wrote, for the moment, the market is happy to look past these issues as the vaccine rollout begins. The economic headwinds,  however, are building in the short term.

Data from the American Petroleum Institute is due later on Tuesday as well as from the U.S. government on Wednesday. It is expected to show that U.S. crude stocks declined last week, while refined product stockpiles rose. This was according to estimates from five analysts polled.

After rising against a basket of currencies, the dollar also weighed on commodity prices.