Oil prices slip over demand concerns due to tighter Covid-19 lockdowns

15 December 2020 (Last Updated December 15th, 2020 11:00)

Oil prices have slipped as tighter Covid-19 lockdowns across Europe and a slower demand recovery forecast by the OPEC next year ‘outweighed relief’ from the coronavirus vaccines’ roll-out.

Oil prices slip over demand concerns due to tighter Covid-19 lockdowns
The price drop is also due to OPEC forecast for a slower recovery in 2021 fuel demand. Credit: John R Perry from Pixabay.

Oil prices have slipped as tighter Covid-19 lockdowns across Europe and a slower demand recovery forecast by the OPEC next year ‘outweighed relief’ from the coronavirus vaccines’ roll-out.

Brent crude futures fell $0.20 to $50.09 a barrel while the US West Texas Intermediate (WTI) crude futures decreased by $0.18 to $46.81 a barrel, reported Reuters.

Due to the surge in Covid-19 infection rates, London imposed much tighter restrictions that required the closing of bars and restaurants.

Furthermore, Italy said it plans to implement tighter restrictions over the Christmas holidays while German stores have been ordered to be closed until 10 January.

ANZ analysts said in a note: “While the market has been buoyed by the roll-out of Covid-19 vaccines, a path towards normalisation of demand remains a difficult one.”

On 14 December, OPEC forecast 2021 oil demand recovery by 350,000bpd due to the continued impact of the Covid-19 pandemic.

However, a rapid roll-out of vaccines in major economies ‘provides potential upside for next year’s growth forecast’.

According to a monthly forecast released by the industry group US Energy Information Administration (EIA), US oil output from shale formations is expected to fall by 136,000bpd in January to 7.44Mbpd.

Hinting a sign of weaker demand, analysts expect the American Petroleum Institute and the EIA data to show that gasoline inventories in the US increased by 1.6 million barrels last week.