NEW YORK: Oil prices slipped on Wednesday, as more European lockdowns and slower US consumer spending tapped the brakes on a rally that has lifted futures by more than 30pc in six weeks.
Brent crude futures fell 25 cents to $50.51 a barrel by 11:02 a.m. EST (1602 GMT). US West Texas Intermediate (WTI) crude futures fell 34 cents to $47.28 a barrel.
US oil demand is down roughly 13pc year-to-date due to the coronavirus pandemic, and Wednesday’s figures on retail sales showed a second consecutive month of declining spending due to a resurgence in Covid-19 cases.
Worldwide demand has been poor, with the most notable rebound coming in China. The International Energy Agency (IEA) warned on Tuesday that it will take some time to reverse the collapse in global oil demand during the pandemic.
“The biggest near-term downside risk to oil demand expectations is the United States, predominately due to persistent weaknesses in US gasoline demand, given the current trajectory of Covid-19 in the country,” analysts at FGE wrote.
The IEA revised down its estimates for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce jet fuel use as fewer people travel by air.
US crude inventories fell by 3.1 million barrels in the week to Dec. 11, the Energy Information Administration said on Wednesday. Analysts had expected a 1.9 million-barrel drop, after stockpiles surged last week.
Slow demand for refined products, including gasoline, distillates and jet fuel, has weighed on market sentiment for months, as lockdowns have kept people indoors.
“Some normalization in the crude oil situation was supportive, but for me the focus is the demand numbers that continue to be horrific with respect to jet fuel, still down 40pc,” said John Kilduff, partner at Again Capital LLC in New York.
Germany entered a strict lockdown on Wednesday, as the number of registered deaths from Covid-19 jumped by the highest daily increase yet.
The market has rallied sharply in recent weeks on progress over Covid-19 vaccine distribution.
US congressional leaders have reported substantial progress in the months-long standoff on coronavirus relief and a funding bill to avert a government shutdown.