Several factors like the sudden surge of coronavirus cases that are hampering the global economy and an unexpected rise in U.S. crude stockpiles lead to a sudden fall in oil prices on Thursday.
The resurge of coronavirus pandemic also has led to falling in the US equities. The sharp increase of COVID-19 in Europe which has led to the second round of lockdown and imposition of new social restrictions has caused a sudden drop in oil prices. According to reports, in the United States of America, new cases have surpassed 100,000 per day for several days. Also, more than a dozen states have doubled their caseloads in the last two weeks.
According to a Reuters report, Brent crude LCOc1 fell by 27 cents and stabilized on $ 43.53 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 also went down by 33 cents to $ 41.12 a barrel.
Reuters reported comments of Phil Flynn, senior analyst at Price Futures Group in Chicago, “When stocks gave up gains, oil followed.”
He also added, “It’s a very nervous market.”
The US crude inventories went up by 4.3 million barrels over the last week, whereas it was expected to see a fall of 913,000 barrels.
According to data, an experimental coronavirus vaccine being developed by Pfizer Inc and BioNTech 22UAy.DE resulted as 90 percent effective to cure the effects of the virus. This has raised hopes of millions around the world that the coronavirus will be brought under control. Despite this development, the oil market still remains shaky. Reuters also reported that The International Energy Agency (IEA) said global oil demand was unlikely to rise significantly until well into 2021 if the vaccine is successful.
They also reported comments of Hussein Sayed, chief market strategist at FXTM, as he said, “While the vaccine remains the best news received since the virus spread, life won’t return to normal in a matter of days or weeks.”
Organization of the Petroleum Exporting Countries (OPEC) also brought down their forecasts for demand on Wednesday. They commented that consumption will rebound more slowly in 2021 than previously thought because of the virus.
Algeria’s energy minister said that OPEC+ could extend the production cuts till 2021 and also hinted that they might even deepen them further if needed.
OPEC+ is expected to wait on a scheduled increase in supply in January because of the unexpected COVID-19 case rise and weakening outlooks. They are also considering a reduction in its supply cuts to 5.7 million barrels per day.
Algeria’s energy minister Abdelmadjid Attar said on Wednesday, “I can assure you that OPEC remains committed to taking appropriate actions, in cooperation with its partners in the Declaration of Cooperation, in a manner that is proactive and effective … this includes the possibility of extending today’s production adjustments into 2021, as well as deepening these adjustments, should market conditions require.”