- The two benchmark stock indexes fell after rising in the past three trading days.
- Last week, OPEC+ agreed to continue to maintain most of the current production restrictions starting in January, with only a small increase in production.
- Analysts say that weather forecasts in parts of the United States will get warmer in the coming days, leading to expectations that demand for heating fuel will decline.
Crude oil futures fell slightly on Monday from a nine-month high. Investors weighed the impact of international tensions on the crude oil market. At the same time, the continuous surge in new coronavirus epidemic cases caused demand concerns. In addition, the dollar fell 1.1%.
New York Mercantile Exchange, January-delivery West Texas Intermediate crude oil futures fell 50 cents to settle at $45.76 a barrel. The price of Brent crude, a global benchmark traded on the Intercontinental Exchange, fell 46 cents to $48.79 per barrel, a 0.9% drop. Also, the two benchmark stock indexes fell after rising in the past three trading days.
“One of the reasons for the lower oil prices this morning is definitely the escalation of the pandemic, which is going to be a drag on growth in the short-term,” Pan Jingyi, senior market strategist at IG Singapore, told S&P Global Platts on December 8.
“If the fiscal stimulus discussions in the US bear some fruit then it would be a positive for oil, but otherwise the market will continue to ruminate over the same issues concerning the pandemic,” Pan added.
Last Friday, the price of West Texas Intermediate oil, based on the recent month contract, rose 1.6% last week, marking the fifth consecutive week of gains. The price of Brent crude oil rose 2.1% last week, closing at its highest level since March. Last week, both the US and Burundi oil rose by more than 2%.
That week, OPEC+, formed by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to continue to maintain most of the current production restrictions starting in January, with only a small increase in production.
Robbie Frazier, Schneider Electric’s global research and analysis manager, said oil demand “is still far below normal levels at this time of year.” However, he said in a market update report:
“In recent weeks, with the upcoming launch of several [coronavirus] vaccines, the situation has continued to improve, which has revived some bullish sentiment in the rough and broader market sentiment.”
Bjornar Tonhaugen, head of oil markets at Rystad Energy, said:
“After the new OPEC+ agreement was released, traders are now looking back at fundamentals, demand, and supply and found that the situation does not look good in the short term and they are forced to return to reality.”
Crude oil prices rose last week because the Organization of the Petroleum Exporting Countries and its allies agreed to relax their production cut plans at a slower rate than originally planned from next month after a series of protracted negotiations.
At the same time, the continued surge in COVID-19 cases, the renewed restrictions on activities, and the expected reduction in travel and social distancing during holidays have cast a shadow over the near-term demand outlook.
Among other energy products traded on the exchange, gasoline fell 1% to $1.2558 per gallon, and heating oil fell 0.3% to $1.3992 per gallon. November natural gas futures fell 6.6% to $2.406 per million BTUs.
Analysts say that weather forecasts in parts of the United States will get warmer in the coming days, leading to expectations that demand for heating fuel will decline.