Oil extend losses as gloom grows over soaring COVID-19 cases, lockdowns

SINGAPORE: Oil prices fell on Tuesday, adding to losses from the previous session that came as California tightened its pandemic lockdown through Christmas and coronavirus cases continued to surge in the United States and Europe.

Brent crude futures fell 51 cents, or 1.1pc, to $48.28 a barrel by 0744 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 45 cents or 1pc, to $45.31 a barrel. Both benchmark contracts lost around 1pc on Monday.

Globally, a sharp rise in coronavirus cases has led to a string of renewed lockdowns, including strict measures in the U.S. state of California as well as Germany and South Korea.

"The pandemic situation is continuing to be very disruptive in quite a few places in the U.S. and parts of Europe. That's impacting sentiment on demand near term," said Lachlan Shaw, National Australia Bank's head of commodity research.

California on Monday required most of the state to close shop and stay at home under a new order which will last at least three weeks.

"California, one of the U.S. largest road fuel demand states, will be in lockdown lite through what is bound to be a Christmas lite for the oil markets," said Stephen Innes, chief market strategist at Axi.

Government sources in France said the country may have to delay unwinding some lockdown restrictions next week after signs the downward trend in new cases had flattened out after shops were allowed to reopen late last month.

Following last week's rally in oil prices on the back of vaccine rollout plans and an agreement by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to hold back supply increases, analysts said they were closely watching U.S. lawmakers' efforts to approve a new economic stimulus package.

The stimulus will be needed to drive jobs growth, and, in turn, energy demand.

"For the moment, the market is happy to look past these issues as the vaccine rollout begins; however the economic headwinds are building in the short term," ANZ Research said in a note.

Data due from the American Petroleum Institute later on Tuesday and from the U.S. government on Wednesday is expected to show that U.S. crude stocks fell last week, while refined product stockpiles rose, according to estimates from five analysts polled by Reuters.

The dollar also weighed on commodity prices after rising against a basket of currencies.