Oil sheds 1% as coronavirus resurgence sparks demand concerns
Oil prices slipped on Monday as the positive impact from COVID-19 vaccine news and an OPEC+ deal on oil production cuts was undermined by surging coronavirus cases and heightened tensions between the United States and China.
Brent crude fell 46 cents to settle at $48.79 per barrel, while U.S. West Texas Intermediate crude settled 50 cents, or 1.08%, lower at $45.76 per barrel.
Both oil contracts gained around 2% last week after OPEC+, comprising of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to increase output slightly from January but continue the bulk of existing supply curbs.
Prices also were under pressure after Reuters exclusively reported that the United States was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.
Rising tensions between the United States and China, the world’s top oil consumers, have weighed repeatedly on the market in recent years.
Meanwhile, a surge in coronavirus cases globally has forced a series of renewed lockdowns, including strict new measures in the U.S. state of California and in Germany and South Korea.
Elsewhere, Iran has instructed its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday.
“Adding to the pressure on oil prices is the potential Iranian increase to production in three months,” said Edward Moya, senior market analyst at OANDA. “Iran is optimistic the U.S. will ease restrictions if they return back to the 2015 nuclear deal.”
Oil jumps to highest level since March after OPEC+ reaches a supply compromise
Brent crude oil futures rose to just under $50 a barrel on Friday as expectations of a U.S. economic stimulus package and the possibility of a vaccine for the coronavirus overrode rising supply and increased COVID-19 deaths.
A bipartisan $908 billion coronavirus aid plan gained momentum in the U.S. Congress.
Brent gained 1.11% to settle at $49.25 per barrel after hitting its highest since early March at $49.92. West Texas Intermediate rose settled 0.99% higher at $46.26 per barrel after touching a high of $46.68 a barrel. Both benchmarks are set for a fifth straight week of gains.
Brent crude could drop to $45 in 2021 despite positive vaccine news, Fitch Ratings says
Fitch Ratings expects Brent prices to drop to $45 per barrel in 2021 — even though there’s good news on the vaccine front, the credit rating agency said this week.
That’s close to 9% lower than what a Refinitiv Eikon poll is predicting. Brent crude could be around $49.35 next year, with $50 being the most common forecast, according to a survey of 36 analysts. The U.S. Energy Information Administration expects the international benchmark to be at $46.59.
Dmitry Marinchenko, senior director at Fitch Ratings, said the company is more cautious.
“We expect prices to be, on average, at $45 next year for Brent,” he told CNBC’s “Capital Connection” on Friday. “This assumes that the demand will remain weak until at least the second half of the year, because the progress with mass vaccination probably will not be very quick.”
Reference: CNBC
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