Oil prices down as surge in coronavirus cases raises concerns about demand

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Oil prices slipped on Thursday as hopes for a vaccine were overshadowed by a surge in new cases of the coronavirus around the world, which raised concerns about the outlook for crude demand.

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While early US trading erased some earlier losses, Brent crude was down 19 cents to $44.15 a barrel at 1430 GMT. US West Texas Intermediate crude slipped 29 cents to $41.52 a barrel.

The Brent price contango, a market structure in which near-month barrels are cheaper than those in later months, implying current oversupply, was at its shallowest in more than four months. This suggests concerns about a glut are easing.

“Retracements will remain part of the everyday life in coming months as rising infections rates and perceived and actual lockdowns battle with the potential roll-out of COVID vaccines. The underlying optimism, however, persists as vaccine trials are powering ahead,” PVM analysts said.

While official US crude inventories rose 768,000 barrels last week, crucially the rise was smaller than the 1.7 million barrels analysts had expected in a Reuters poll.

Stores of distillates, which include diesel and heating oil, fell by 5.2 million barrels, far more than expectations.

But concerns about the demand outlook persist. The US death toll from COVID-19 surpassed 250,000, while daily cases in Japan and Russia surged. Among tougher curbs to prevent the virus spreading, New York City shut public schools.

Equity markets also fell, after reaching record highs this week after Pfizer and BioNTech announced progress on coronavirus vaccine trials.

“Investors are also booking profits from the recent rally before the US Thanksgiving holiday later this month,” said Kazuhiko Saito, chief analyst at Fujitomi Co.

Concerns about oversupply remain. Libya’s National Oil Corporation (NOC) and France’s Total discussed NOC’s efforts to raise capacity and increase production.

OPEC+, comprising the Organization of the Petroleum Exporting Countries, Russia and other producers, will discuss policy at a meeting on November 30 and December 1.

Sources says OPEC+ members are leaning towards delaying a plan to boost output in January by 2 million barrels per day (bpd).