MELBOURNE- Oil prices fell on Tuesday, adding to losses from the previous session that came as California tightened its pandemic lockdown through Christmas and coronavirus cases continued to surge in the United States and Europe.
US West Texas Intermediate (WTI) crude futures fell 18 cents or 0.4 percent, to $45.58 a barrel, while Brent crude futures fell 24 cents, or 0.5 percent, to $48.55 a barrel. Both benchmark contracts lost around 1 percent on Monday.
Globally, a sharp rise in coronavirus cases has led to a string of renewed lockdowns, including strict measures in the US state of California as well as Germany and South Korea.
“The pandemic situation is continuing to be very disruptive in quite a few places in the US and parts of Europe. That’s impacting sentiment on demand near term,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
California on Monday required most of the state to close shop and stay at home under a new order which will last at least three weeks.
Government sources in France said the country may have to delay unwinding some lockdown restrictions next week after signs the downward trend in new cases had flattened out after shops were allowed to reopen late last month.
Following last week’s rally in oil prices on the back of vaccine rollout plans and an agreement by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to hold back supply increases, analysts said they were closely watching US lawmakers’ efforts to approve a new economic stimulus package.
The stimulus will be needed to drive jobs growth, and, in turn, energy demand.
“For the moment, the market is happy to look past these issues as the vaccine rollout begins; however the economic headwinds are building in the short term,” ANZ Research said in a note.
Data due from the American Petroleum Institute later on Tuesday and from the US government on Wednesday is expected to show that US crude stocks fell last week, while refined product stockpiles rose, according to estimates from five analysts polled by Reuters.
Meanwhile, hedge fund managers were substantial buyers of petroleum futures and options last week for the fourth week in a row, a sign of increasing confidence coronavirus vaccines will drive a recovery in oil consumption next year.
Fund managers purchased crude and distillates, even as OPEC+ prepared to lift oil production, implying that a business cycle upturn and resumption of international aviation is expected to absorb extra output.
Funds purchased the equivalent of 44 million barrels in the six most important petroleum futures and options contracts in the week to Dec. 1, taking total purchases over the four most recent weeks to 304 million barrels.