Oil prices slipped on Thursday as hopes for a vaccine were overshadowed by a surge in new cases of the coronavirus around the world, which raised concerns about the outlook for crude demand. Brent crude fell 0.32% to settle at $44.20 per barrel. U.S. West Texas Intermediate crude slipped 8 cents to settle at $41.74 per barrel.
The Brent price contango, a market structure in which near-month barrels are cheaper than those in later months, implying current oversupply, was at its shallowest in more than four months. This suggests concerns about a glut are easing.
"COVID is definitely weighing on the market," said Bob Yawger, director of energy futures at Mizuho in New York. For crude oil, specifically, though, there's a risk that a new OPEC price war could emerge, Yawger said. "I think they will come to an agreement, but 24 hours ago, it seemed like a done deal," he said.
While official data on Wednesday showed U.S. crude inventories rose 768,000 barrels last week, crucially the rise was smaller than the 1.7 million barrels analysts had expected in a Reuters poll.
Stores of distillates, which include diesel and heating oil, fell by 5.2 million barrels, far more than expectations.
But concerns about the demand outlook persist. The U.S. death toll from COVID-19 surpassed 250,000, while daily cases in Japan and Russia surged. Among tougher curbs to prevent the virus spreading, New York City shut public schools.
Equity markets also fell, after reaching record highs this week after Pfizer and BioNTech announced progress on coronavirus vaccine trials.. "Investors are also booking profits from the recent rally before the U.S. Thanksgiving holiday later this month," said Kazuhiko Saito, chief analyst at Fujitomi Co.
Concerns about oversupply remain. Libya's National Oil Corporation (NOC) and France's Total discussed NOC's efforts to raise capacity and increase production.
OPEC+, comprising the Organization of the Petroleum Exporting Countries, Russia and other producers, will discuss policy at a meeting on Nov. 30 and Dec. 1.
says OPEC+ members are leaning towards delaying a plan to boost output in January by 2 million barrels per day (bpd).
UAE Energy Minister Suhail al-Mazrouei said his country has always been a committed member of OPEC and that it has demonstrated this commitment through its compliance to the current OPEC+ oil supply reduction agreement.
The minister's comments were in response to media reports that the UAE has been questioning the benefits of being in OPEC and even considering whether to leave the oil producing group.