Oil prices fell on Thursday, snapping three consecutive daily gains, as traders tempered expectations of an early release of a COVID-19 vaccine and the IEA raised doubts about a quick demand rebound amid surging infections in Europe and the United States.
Europe is already grappling with surging infections and new social restrictions. New York has ordered bars and restaurants to close early as U.S. cases hit record levels.
“The vaccine-related rotation has quickly faded as investors have realised that the pandemic won’t disappear as fast as it arrived,” said Hussein Sayed, chief market strategist at FXTM.
“While the vaccine remains the best news received since the virus spread, life won’t return to normal in a matter of days or weeks,” he added.
Both Brent and WTI soared earlier this week, lifted by hopes that the global pandemic can be brought under control after data showed an experimental COVID-19 vaccine being developed by Pfizer Inc PFE.N and Germany’s BioNTech 22UAy.DE was 90% effective.
However, the International Energy Agency (IEA) said on Thursday that global oil demand was unlikely to get a significant boost from the roll-out of the vaccine until well into 2021.
The Organization of the Petroleum Exporting Countries (OPEC) also revised its demand forecast on Wednesday, saying global oil demand will rebound more slowly in 2021 than previously thought because of rising coronavirus cases.
Tamas Varga, analyst at PVM Oil said until the exact timing of the availability of the vaccine becomes clearer, oil prices “downside could turn out to be limited, but serious upside potential is unlikely to develop in the immediate future.”
Algeria’s energy minister said OPEC+ – grouping OPEC and allies like Russia – could extend production cuts of 7.7 million barrels per day (bpd) into 2021, or deepen them further if needed.
The weakening outlook has piled pressure on OPEC+ to hold back a supply increase of 2 million bpd scheduled for January, with the market now pricing in a delay, analysts said.
“We feel OPEC has no choice but to delay output increases, most likely by three months,” analysts at ANZ Research said in a note.