U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sideways to lower on Thursday as another jump in coronavirus cases and tighter economic restrictions around the globe stoked fears over slower fuel demand, outweighing upbeat vaccine news. We could also be looking at some light profit-taking ahead of next week’s U.S. Thanksgiving holiday, which could turn into a super coronavirus spreading event.
Global COVID-19 Surge Threatens Demand Recovery
In the United States, the death toll from coronavirus surpassed a grim new milestone of 250,000 lives lost on Wednesday, as New York City’s public school system, the nation’s largest, called a halt to in-classroom instruction, citing a surge in coronavirus infection rates.
In Japan, Tokyo posted the highest coronavirus alert level on Thursday with its daily tally of new cases set for a record high of more than 500, and its governor warned of much worse unless action is taken.
Russia surpassed 2 million coronavirus cases after reporting an additional 23,610 infections and 463 deaths related to COVID-19, both daily rises.
All of this adds up to slower consumption and fuel demand which is potentially bearish for prices.
Supply Outlook Mixed This Week
Boosting worries about oversupply, Libya’s National Oil Corporation (NOC) and France’s Total discussed NOC’s efforts to raise capacity and increase production rates to the highest levels.
However, in the U.S., the government reported crude inventories rose less than expectations, but distillate stockpiles fell sharply, far exceeding expectations.
Lingering worries over a global supply glut will likely limit upside oil prices, but with OPEC+ leaning toward delaying the current plan to boost output in January by 2 million barrels per day (bpd), prices may be underpinned.
So we’re looking for a sideways trade, but leaning a little toward the downside because the vaccine euphoria will eventually wear off while at the same time I expect the virus numbers to continue to surge.
For a look at all of today’s economic events, check out our economic calendar.