Oil falls on coronavirus surge but on track for weekly gain

LONDON: Oil prices fell on Friday, pressured by fears about a slow recovery in the global economy and fuel demand due to rising coronavirus infections, but hopes for a vaccine kept the market on track for a second straight weekly gain.

Brent crude was down 71 cents, or 1.63pc, at $42.82 a barrel as of 1343 GMT. US West Texas Intermediate (WTI) crude futures fell 84 cents, or 2.07pc, to $40.28 a barrel.

For the week, both were headed for a surge of about 9pc.

US government data also added pressure, as crude inventories rose by 4.3 million barrels last week, compared with an expected fall of 913,000 barrels.

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“In essence, some of the feel-good factor from the Pfizer vaccine has worn off and disappointing EIA figures have created a bit of a downward correction,” Harry Tchilinguirian, head of commodity research at BNP Paribas, said.

“However, OPEC+ is prepared to tweak its production and we’re still waiting for the trial results of other vaccines that may be easier to distribute since they won’t need such cold storage.”

New coronavirus infections in the United States and elsewhere are at record levels and tightening restrictions to contain the spread have dampened the prospect of a near-term end to the global health crisis.

Hopes were high that a resolution to the pandemic is on the horizon – stoking this week’s jump in WTI and Brent contracts – after data showed an experimental Covid-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90pc effective.

The International Energy Agency (IEA), however, said on Thursday that global oil demand is unlikely to get a significant boost from any roll-out of Covid-19 vaccines until well into 2021.

“Views that it would take time to see any benefit from a Covid-19 vaccine prompted investors to unwind their long positions,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

Chart analysis suggests WTI is headed toward $39.50 a barrel, he added.

Analysts say tougher restrictions on mobility to deal with sky-rocketing coronavirus cases mean the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, may hesitate to implement a planned loosening of output curbs agreed in a deal earlier this year.

Algeria’s energy minister said this week that OPEC+ could extend the group’s current oil production cuts into 2021 or deepen them further if required.

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