Oil under pressure from pandemic spikes

Oil prices fell slightly Tuesday morning in Asia, following the lead of US markets overnight.

Brent oil futures fell 0.23% to $48.53 by 8:40 PM ET (01:40 AM GMT) and crude oil WTI futures fell 0.45% to $45.56.

Oil prices have come under pressure this week by the combined impact of renewed pandemic lockdowns and uncertainty about the long-term outlook of production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).

After some delays, OPEC+ reached a deal last week to continue with production cuts in January, although production will increase slightly. That deal helped reassure investors and pushed oil up by about 2% last week. It is uncertain how long the ongoing production cuts will remain in place.

“With the OPEC deal in the bag, now traders looked back at fundamentals, demand and supply, and they were forced to come back to earth as things are not looking good in the short-term,” Bjornar Tonhaugen, head of oil markets at Rystad Energy told CNBC.

Adding to the concerns, Iran may be getting ready to boost production within three months.

Putting more downward pressure on oil prices were news of record-high COVID-19 cases in the US and spikes in places like Germany and South Korea, which spurred new lockdowns and increased fears that demand could plummet in the short term. The rollout of vaccines in the UK and the likelihood that the US would follow suit this week were not enough to reassure investors at the beginning of the week.

Oil was also hurt by a breakdown in Brexit talks between the U.K. and the Eurozone as well as news that the U.S. is getting ready to impose sanctions on more than a dozen Chinese officials in relation to their actions in Hong Kong.

Investors are now looking forward to crude oil supply data from the American Petroleum Institute, due later in the day.

First published Investing.com