Oil futures lost ground Monday, pulling back from a nine-month high as COVID-19 cases continued to surge, underlining worries about fuel demand.
Oil demand “remains well below normal levels for this time of year,” said Robbie Fraser, manager of global research and analytics at Schneider Electric.
However, “continued improvement alongside the impending rollout of several [COVID-19] vaccines has brought some renewed bullishness to crude and broader market sentiment in recent weeks,” he said in a market update.
West Texas Intermediate crude for January delivery fell 32 cents, or 0.7%, to $45.94 a barrel on the New York Mercantile Exchange. February Brent crude, the global benchmark, was off 32 cents, or 0.7%, at $48.93 a barrel on ICE Futures Europe.
Prices for WTI, based on the front-month contract, logged a weekly gain of 1.6%, their fifth consecutive weekly climb, according to Dow Jones Market Data. Brent saw a 2.1% weekly rise for its highest finish since March.
Crude rallied last week as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed after a protracted set of negotiations to relax output cuts more slowly than previously planned beginning next month.
Meanwhile, a continued surge in COVID-19 cases, renewed restrictions on activity and expectations people will travel less and socially distance were fueling worries about the near-term demand prospects.
“Some of the shine is coming off the OPEC rally as the reality of ‘Xmas lite’ sets in with the bulk of Californians, one of the U.S.’s biggest road fuel demand states, are set to enter wide-sweeping new virus lockdowns,” said Stephen Innes, global chief market strategist at Axi, in a note.
Most California residents are under a new stay-at-home order as the state’s intensive care units near capacity.
“Still, with China and India’s demand at ‘pedal to the metal’ and sentiment supported by vaccines’ progress, [the] oil market selloff will likely be bought by stronger Asia hands,” Innes said.
On Nymex, prices for petroleum futures also moved lower, with January gasoline down 0.8% at $1.2584 a gallon and January heating oil off 0.2% at $1.4003 a gallon.
Natural-gas futures led the decline on Nymex, with the January contract dropping 6.8% to $2.40 per million British thermal units. Analysts said warmer weather forecasts for parts of the U.S. for the next several days contributed to expectations for lower demand for the heating fuel.