Oil Price Fundamental Daily Forecast – Bleak Fuel Demand Outlook Weighing on Prices as COVID-19 Cases EscalateDespite the strong weekly gains, it’s hard to get excited about a rally on Friday with the pandemic escalating, and the demand recovery threatened.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday. The catalysts behind the selling pressure are fears over skyrocketing COVID-19 cases and their negative effect on the global demand recovery. Nonetheless, the markets remain on track to finish higher for a second consecutive week, helped by vaccine hopes.
At 12:15 GMT, December WTI crude oil futures are trading $40.48, down $0.64 or -1.56% and January Brent crude oil is at $43.03, down $0.50 or -1.15%. For the week, both futures contracts are headed for a surge of about 8%.
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This week’s strength was primarily driven by data that showed an experimental COVID-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90% effective.
Also providing support was the notion that OPEC+ may delay to implement a planned loosening of output cuts agreed in a deal this year.
An escalation of COVID-19 cases in the United States is taking center stage on Friday. New coronavirus infections in the U.S. and elsewhere are at record levels and tightening economic restrictions to contain the spread have dampened the prospect of a near-term end to the global health crisis.
Additionally, the International Energy Agency (IEA) threw cold water on the vaccine news when it said on Thursday that global oil demand is unlikely to get a significant boost from the rollout of vaccines against COVID-19 until well into 2021.
Despite the strong weekly gains, it’s hard to get excited about a rally on Friday especially with the pandemic escalating and health officials warning that conditions will worsen in the U.S. and Europe over winter.
Furthermore, the price action the last two sessions suggests the market has largely discounted a likely delay in tapering of cuts. Additionally, there are growing concerns that the crude oil market is unlikely to see any benefit from a COVID-19 vaccine for several months.
Finally, U.S. Federal Reserve Chairman Jerome Powell warned Thursday that the “next few months could be challenging” despite recent developments on the vaccine front.
“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Powell said regarding the vaccine.
For a look at all of today’s economic events, check out our economic calendar.