TOKYO- Oil prices fell on Tuesday as fading hopes for a rapid approval of new US economic stimulus and mounting new coronavirus cases raised questions over the pace of any recovery in demand.
Brent crude was down 28 cents, or 0.5 percent, at $55.60, while US crude fell 25 cents, or 0.5 percent, to $52.52. Both rose nearly 1 percent on Monday.
Having recently hit 11-month highs, oil is caught between lingering doubts over any recovery in demand as the pandemic continues to rage, offset by optimism for more stimulus from the newly installed Biden administration in the United States to support economic growth as vaccines are rolled out.
But Biden administration officials are still trying to convince Republican lawmakers of the need for more stimulus, raising questions over when it will be approved.
“The negative sentiment sweeping Asia today, as the reality of US stimulus politics dawns, has seen both contracts move lower,” said Jeffrey Halley, senior market analyst at OANDA.
Even as the pace of new infections falls in the United States, European nations have set tough restrictions to combat the spread of the virus, while China is reporting rising new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.
Still, there are areas where demand for oil remains strong.
In India, crude oil imports in December rose to their highest in more than two years as the easing of coronavirus restrictions boosted economic activity.
On the supply side, the Organization of the Petroleum Exporting Countries and its allies’ compliance with pledged oil output curbs is averaging 85 percent in January, tanker tracker Petro-Logistics said on Monday.
The findings suggest the group has improved compliance supply curb commitments.
OPEC+ agreed to increase output by 500,000 barrels per day in January as part of a plan to taper huge cuts made last year as the coronavirus pandemic hammered demand.
However, the Petro-Logistics figures unexpectedly suggest production is lower, and compliance with cuts higher, than in December. A trend of high compliance could lend further support to oil prices, which are near an 11-month high.
“The biggest reductions in January supply are expected from Libya, Iraq and Nigeria,” Petro-Logistics, a Geneva-based consultant, said in an email to Reuters, referring to trends seen within OPEC.
OPEC’s compliance with pledged supply curbs is close to 100 percent in January, the company said. That is up from December’s figure of 82 percent as estimated by Petro-Logistics on Jan. 12.
The January figure for OPEC+ compliance is up from 75 percent in December, according to the company’s estimates.