Oil prices have slipped away from the $50 per barrel goal, in the middle of surging covid-19 cases and geopolitical tension between the United States and China.
Brent crude fell 59 cents, 1,2%, and closed at $48,66 this Monday, while the West Texas Intermediate fell 58 cents, 1,3% to $45,68.
As we reported previously, oil prices had a five-week-straight gains as the market hoped for a demand recovery thanks to the coronavirus vaccine.
As AstraZeneca and Moderna reported an effectiveness of their vaccines of more than 90%, global market watchers and investors hoped for speedy recovery.
Also, there was the Organization of Petroleum Exporting Countries (OPEC) and its allies, on discussions about the extension of current oil production cuts.
After several meetings, OPEC and its allies known as OPEC+ finally reached consensus on extending cuts to January 1, and then monthly escalating it by 500,000 barrels.
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Factors adding pressure to oil prices
News were embraced with optimism by the market; oil prices rose to their highest since the demand and prices destruction of early 2020, when the pandemic peaked.
Nevertheless, “surging virus cases and a Reuters report signaling the United States is preparing new sanctions on Chinese officials outweighed the positive sentiment driven by vaccine news;” Hussein Sayed, chief market strategist at FXTM, said quoted by Reuters.
According to the news media, the U.S is getting ready to impose new sanctions on at least a dozen Chinese officials. This, over their alleged role in Beijing’s disqualification of elected opposition legislators and the implementation of their National Security Law.
Also, “adding to the pressure on oil prices is the potential Iranian increase to production in three months. Iran is optimistic the U.S. will ease restrictions if they return back to the 2015 nuclear deal,” said Edward Moya, senior market analyst at OANDA, quoted by Reuters.
Iran’s state media has announced that it is preparing to sell and produce oil at full capacity over the next three months; which may oversupply the market and break its fragile balance. As for the Covid cases, they keep reducing the demand, as new lockdowns and traveling measures are taken by governments to contain the spread.
