Oil futures edged lower Thursday, with U.S. prices posting their first loss in four sessions, as a persistent rise in COVID-19 cases in the U.S. and around the world highlighted worries about crude demand, overshadowing positive news on the vaccine front.
Concerns about unity within the Organization of the Petroleum Exporting Countries also pressured prices, analysts said. Natural-gas futures, meanwhile, suffered the largest losses on Nymex Thursday, after the U.S. government reported a larger-than-expected weekly increase in domestic supplies of the fuel.
The front month December West Texas Intermediate crude which expires at Friday’s settlement, fell 8 cents, or 0.2%, to settle at $41.74 a barrel on the New York Mercantile Exchange. The U.S. benchmark had posted gains in each of the last three sessions. January WTI crude the most actively traded contract, declined by 11 cents, or 0.3%, at $41.90 a barrel. January Brent crude the global benchmark, lost 14 cents, or 0.3%, at $44.20 a barrel on ICE Futures Europe. Both benchmarks on Wednesday settled at the highest levels since early September. But analysts said new lockdowns in response to rising COVID-19 cases weighed on markets. New York City on Wednesday announced the closure of all public schools after the city’s positivity rate from virus tests reached a seven-day average of 3% — the threshold set to keep schools open.
The move comes as cases rise across much of the country, including rural and urban areas, putting strains on hospital systems. “The U.S. has seen a significant uptick in new restrictions across various states this week, with virus cases setting records ahead of the traditional holiday travel season,” said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note. “There is little question that holiday travel will be far below normal levels this year, though exactly how far below remains subject for debate,” he said. A week ahead of Thanksgiving, experts estimate as much as a 45% drop in the number of holiday travelers compared with last year, even with Americans expected to pay the lowest gasoline prices for the season since 2016.
On a more upbeat note, reports on Thursday afternoon indicated that talks in the U.S. about a coronavirus aid package may soon resume, with CNBC quoting Sen. Chuck Schumer of New York, the chambers top Democrat, as saying that Senate Majority Leader Mitch McConnell, R-Ky., agreed to resume negotiations with Democrats over a potential aid package.
Meanwhile, analysts noted signs of rising tensions within OPEC+, the alliance between the cartel and other major producers. Bloomberg reported that officials from the United Arab Emirates, speaking on the condition of anonymity, questioned the benefits of being in the alliance. Speculation this week has centered on whether OPEC+ would decide at a Nov. 30-Dec. 1 meeting to extend existing output cuts or stick with a schedule that would ease those restrictions in January. “Now it even seems that one of OPEC’s core countries, the UAE, is no longer willing to maintain the production cuts in view of the rise in production elsewhere,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note. With production also picking up in Russia, much will depend on Saudi Arabia, he said. “If production discipline can be restored within the group, this would boost the market’s [confidence] in the alliance. That said, it is also possible that Saudi Arabia will react in much the same way as it did in March, meaning that another price war is possible,” he said, referring to a monthlong battle between Saudi Arabia and Russia that flooded the world with crude as the global economy nearly shut down in response to the COVID-19 pandemic.
