Oil down on demand outlook on European lockdowns

LONDON, November 6, 2020 – Oil was down on Friday morning in Asia, after new lockdowns came in effect in Europe to curb the incessantly rising number of Covid-19 and dimming the demand outlook. The wait for a result from the US presidential elections is also keeping investors on tenterhooks.

Brent oil futures fell 2.15% to $40.05 by 12:14 AM ET (4:14 AM GMT), but stayed above the $40 mark. WTI futures slid 2.40% to $37.86.

Italy reported a record number of daily Covid-19 cases on Thursday and several US states also saw record numbers of cases in the wake of the election.

“The situation is likely to get worse as the weather gets colder, with the threat of European-style lockdowns looming on the horizon,” Mizuho Securities director of energy future Bob Yawger told Reuters.

With many countries re-entering lockdowns as a second Covid-19 wave hits the region, the European Union (EU)’s executive commission cut its economic forecast, now predicting that the EU won’t see a rebound to pre-virus levels until 2023.

On the election front, Democrat Joe Biden has so far claimed 264 of the 270 electoral votes needed with Pennsylvania, Georgia, Nevada and North Carolina still counting votes. Incumbent President Donald Trump has 214 votes and increased the chances of a contested election by mounting legal challenges to vote counts in Nevada, Pennsylvania, Georgia and Michigan as well as requesting a recount in Wisconsin. Trump also cast doubt on the election’s credibility earlier in the day.

With a Biden presidency potentially facing a Republican Senate, the dashed hopes of a large stimulus package weighed on the black liquid.

“The most critical questions for oil are how quickly a Covid-19 vaccine is widely available, whether a US stimulus deal can be achieved in a fractious and uncertain political environment, and how OPEC will respond to demand concerns,” Axi chief global market strategist Stephen Innes told Reuters.

The Organization of the Petroleum Exporting Countries and allies including Russia, or OPEC+, continues debating a delay in bringing back 2 million barrels per day of supply originally scheduled for January 2021.

First published on Investing.com

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