Oil dropped from a seven-month high on Thursday, as increased supply signals halted the rally driven by optimism that COVID-19 vaccines will stimulate fuel demand.
Brent futures surged to about $ 50 a barrel this week after three major pharmaceutical companies announced progress that they could begin releasing vaccines before the end of the year. The concerns that the market could keep falling continue despite strong fundamentals to support vaccine development.
Brent was down 74 cents, or 1.5%, at $47.87 a barrel by 1650 GMT on Thursday, having dropped as much as $1. The contract gained about 1.6% in the previous session.
West Texas Intermediate (WTI) crude fell 66 cents, or 1.4%, to $45.05 after gaining 1.8% on Wednesday.
Increasing lockdowns with the worsening of the COVID-19 pandemic, the increasing number of oil production rigs in the United States, and increased production from Libya pose risk factors for bulls.
The United States has recorded 2.3 million new infections in the past two weeks. Because of Thanksgiving, the new President Joe Biden has invited people to give up large family gatherings, wear protective masks and maintain social distance. But Americans defy this call.
While demand for fuel has fallen with a second round of lockdowns, the mismatch has turned into a smaller-than-expected drop in European demand. A 20% to 30% decrease in activity was expected if the restrictions currently applied in Europe were widely implemented. Real-time measurements show a decrease of only around 12%.
OPEC and its allies, including Russia, tend to postpone the oil production growth planned for next year to help offset the trauma in demand and rising Libyan production from the second wave of COVID-19.
Investors are waiting for the OPEC meeting next week. Tomorrow traders will begin to position themselves for next week’s OPEC + meeting. The consensus among analysts is that the current ceiling will be extended for at least another three months, and less than that will trigger a sharp sell-off.