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December 8, 2020

Oil prices slip as Covid-19 cases continue to surge in US and Europe

Oil prices have edged-down as stringent new measures continue through Christmas in southern California, US, which is one of the world’s top oil consumers.

By Himaja Ganta

Oil prices have edged-down as stringent new measures continue through Christmas in southern California, US, which is one of the world’s top oil consumers.

The price drop is also due to a surge in Covid-19 infections across the US and Europe.

Brent crude futures were down by $0.51 to $48.28 a barrel while the US West Texas Intermediate (WTI) crude futures fell $0.45 to reach $45.31 a barrel, Reuters reported.

Both the Brent and the WTI benchmarks fell by 1% on 7 December.

Globally, a surge in Covid-19 infections has led to new lockdowns, including tighter measures in California, as well as Germany and South Korea.

National Australia Bank commodity research head Lachlan Shaw was quoted by the news agency as stating: “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.”

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On 7 December, new measures in California required the state to close shops for at least three weeks.

Axi chief market strategist Stephen Innes stated: “California, one of the US largest road fuel demand states, will be in lockdown lite through what is bound to be a Christmas lite for the oil markets.”

Analysts said they were closely observing American lawmakers’ efforts to approve a new Covid-19 relief aid following oil prices rally supported by vaccine rollout plans and agreement by OPEC+ to delay supply increases.

The US stimulus package will be needed at this point in time to drive energy demand and jobs growth.

ANZ Research said in a note: “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.”

Due to be released by the industry groups American Petroleum Institute (API) on 8 December and from the US EIA on 9 December, data is expected to show a drop in US crude stocks.

Meanwhile, the American dollar also weighed on commodity prices after rising against a set of currencies of other countries.

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