By Barani Krishnan
Investing.com – Oil was headed for its biggest week in two months on Friday, but concerns over an explosion in new U.S. Covid-19 cases cut into the market’s gains over the past two days.
New York-traded , the leading indicator for U.S. crude, and London’s , the global benchmark for oil, both showed an advance of more than 8% on the week.
But for the day, WTI was down 82 cents, or 2%, at $40.30 by 1:46 PM ET (18:46 GMT). Brent, meanwhile, slid 58 cents, or 1.3%, to $42.95.
Investors’ over-exuberance with progress reported by Pfizer (NYSE:) on its Covid-19 vaccine trials triggered a massive rally in risk assets on Monday, giving Wall Street’s its biggest one-day gain since June and oil most of this week’s gain.
But as the week wore on, the extremely challenging storage conditions for the Pfizer vaccine as well as delivery logistics have become clearer, diminishing those market gains.
On the infection front, U.S. Covid-19 cases hit another daily record high on Thursday, with 153,000 reported, making it the 10th straight day where the infection count stood at above 100,000. According to Johns Hopkins University, some 10.6 million Americans have contracted the virus so far, while more than 240,000 have died from complications caused by it.
Michael Osterholm, a top advisor on President-elect Joe Biden’s coronavirus task force, on Thursday floated the idea of shutting down U.S. businesses over four to six weeks to control the spread of the pandemic. If enforced, it would be the second nationwide lockdown since the March-May stay-home orders that curbed the first wave of the outbreak.
In Europe too, the situation is challenging, with freeway operator Vinci reporting on Friday that traffic fell by 48% in the first full week of November in response to the government’s latest public health measures. Those measures in Europe’s second-largest economy are set to stay in place until Dec 1 at least. England is also in a state of semi-lockdown, while German Chancellor Angela Merkel warned on Friday that her government’s recent restrictions on social gatherings may have to last through the new year.
“Oil has continued to move lower following an early week surge as the market assesses the ongoing demand destruction as coronavirus cases continue to surge in the US and Europe with added restrictions being implemented,” Alexander Turro, market strategist for RJO Futures in Chicago, said.
Since WTI’s breakout to 10-week highs above $43 on Wednesday, Turro noted that it has corrected to a range of $42.89-$38.31 “as (anemic) global consumption and dampening fuel demand continue to remain at the forefront.”
While last week’s large declines in and — reported Wednesday — helped put a floor under $40 WTI, sentiment was weakened again by Thursday’s ominous forecast for demand by the Paris-based International Energy Agency. Also recent OPEC rumblings about staying the course with production cuts were offset by the cartel’s lowering of its demand outlook.
Finally, there’s the U.S. — that indicator of future production — which rose for the eight week in a row on Friday, according to a reading by industry firm Baker Hughes.
While U.S. crude production has fallen from pre-pandemic record highs of 13.1 million barrels per day in mid-March to 10.5 million bpd now, the creeping rig count is raising concerns that output might swell at the wrong time as the world is heading for more Covid-19 curbs.
— With reporting contributed by Geoffrey Smith