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Oil prices dropped on Tuesday as concerns over demand in the near term in Europe and the United States returned to haunt the market after an overnight surge on progress towards a COVID-19 vaccine.
U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1.5%, to $39.69 a barrel at 0139 GMT, while Brent crude futures fell 54 cents, or 1.3%, to $41.86 a barrel.
Both benchmark contracts jumped 8% on Monday in their biggest daily gains in more than five months after “Pfizer” and “BioNTech” pharmaceuticals said an experimental COVID-19 vaccine was more than 90% effective based on initial trial results.
Rystad Energy said lockdowns in Europe could result in the loss of a further 1 million barrels per day of oil demand by the end of this year, while it would take several more months before a vaccine would be available.
“The fast-tracking of multiple vaccines doesn’t mitigate the risk that many U.S. states will have to return to some form of lockdown this autumn/winter,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said.
Tuesday’s oil price decline was tempered by comments from Saudi Arabia’s energy minister, who said on Monday the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, could tweak their supply cut pact if demand slumps before the vaccine is available.
OPEC+ agreed to cut supply by 7.7 million barrels per day from August through December and then ease the cut to 5.7 million bpd from January.
