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Markets

Oil prices mixed as surging COVID-19 cases outweigh vaccine optimism

  • US crude stocks rise less than expected.
  • Distillate inventories plunge –EIA.
  • Shutdowns mount as global COVID-19 cases surge.
  • Pfizer says its COVID-19 vaccine is 95% effective.
19 Nov 2020

TOKYO: Oil futures were mixed on Thursday as the surge in coronavirus cases and tighter economic restrictions around the globe stoked fears over slower fuel demand, outweighing upbeat vaccine news.

Brent crude futures rose 12 cents, or 0.3%, to $44.46 a barrel by 0732 GMT, reversing from an earlier loss. US West Texas Intermediate crude slipped 3 cents, or 0.1%, to $41.79 a barrel, paring most of its earlier declines.

Brent rose 1.4% and WTI climbed nearly 1% on Wednesday.

"The spread of coronavirus infection and fresh restrictions in the United States and other parts of the world hit market sentiment as it would hamper fuel demand," said Kazuhiko Saito, chief analyst at Fujitomi Co.

"Investors are also booking profits from the recent rally before the US Thanksgiving holiday later this month," he said.

The US death toll from COVID-19 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 jump in coronavirus infection rates.

The Japanese capital 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 record daily rises.

Worries about coronavirus-related economic damage overshadowed upbeat news from Pfizer and BioNTech that are seeking US and European authorization for their COVID-19 vaccines next month.

"Weaker global equities amid growing worries over the surging pandemic also bolstered fears over slowing consumption and fuel demand," said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Asian shares drifted off all-time highs on Thursday as widening COVID-19 restrictions in the United states weighed on Wall Street.

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.

Supporting prices, US crude inventories rose 768,000 barrels last week, less than analyst expectations in a Reuters poll for a 1.7 million-barrel rise, government data showed. Distillate stockpiles, which include diesel and heating oil, fell by 5.2 million barrels, far exceeding expectations.

"Still, lingering worries over a global supply glut, especially with the COVID-19-hit economies, will likely limit upside of oil prices," Fujitomi's Saito said, predicting WTI to be traded between $40 and $42 a barrel until the OPEC+ meeting later this month.

OPEC+, comprising the Organization of the Petroleum Exporting Countries, Russia and other producers, is due to discuss policy at a full ministerial meeting to be held on Nov. 30 and Dec. 1.

Members of OPEC+ are leaning towards delaying the current plan to boost output in January by 2 million barrels per day (bpd), sources have said.