- WTI nurses losses as demand concerns persist despite coronavirus vaccine news.
- Europe’s lockdown restrictions threaten to derail the fragile economic recovery.
The West Texas Intermediate (WTI) crude is feeling the pull of gravity during Tuesday’s Asian trading hours, with investors pricing prospects of a renewed coronavirus-induced slowdown in Europe and the US.
The North American oil benchmark tested the 50-day simple moving average (SMA) support at $39.46, having hit a high of $41.33 on Monday.
Demand concerns overshadow vaccine news
Major European economies such as France and Germany have reimposed economically-painful lockdown restrictions to contain the second wave of the virus. The US, too, is facing a resurgence of the virus, which caused a record economic contraction in the second quarter.
Put simply, demand conditions are likely to weaken in the near-term irrespective of the fact that the world has moved close to a coronavirus vaccine in the past 24 hours. According to Rystad Energy, lockdowns in Europe could destroy 1 million barrels per day of oil demand by the end of this year. As such, oil is on the defensive and may suffer a deeper decline if the virus numbers continue to rise.
US oil inventory numbers are due later Tuesday from the American Petroleum Institute, and on Wednesday from the Energy Information Administration, according to Reuters.
On Monday, the US drugmaker Pfizer announced positive results for its coronavirus vaccine, sending stock markets and other risk assets higher. WTI rallied from $37.34 to $41.33. The most notable move was in the US junk (high risk) bond yield, which fell by over 30 basis points to hit record lows (bond prices and yields move in opposite directions).
Technical levels
Share
