Oil falls on demand concerns as COVID-19 closures tighten By Reuters

By Alex Lawler

LONDON (Reuters) – Oil fell to $ 50 a barrel on Tuesday as tighter lockdowns in Europe and forecasts of a slower recovery in demand outpaced the relief from the launch of coronavirus vaccines.

London stepped up pandemic restrictions requiring bars and restaurants to close, Italy is considering stricter measures over Christmas, and Germany is likely to be on lockdown until early 2021.

It fell 2 cents to $ 50.27 a barrel at 0910 GMT. US West Texas Intermediate (WTI) crude rose 2 cents to $ 47.01.

“It appears that the market is facing some sort of reality check, as the initial euphoria from vaccine developments is waning,” said Tamas Varga of oil brokerage PVM.

Oil has recovered in recent weeks, with Brent hitting $ 51.06, its highest level since March, on December 10, supported by hopes of recovery in demand. Prices plummeted to record lows in March as the pandemic took hold.

But in a reminder that the immediate outlook is for further weakness, the International Energy Agency cut its demand estimates on Tuesday, saying any impact of the vaccine on fuel demand is several months away. [IEA/M]

OPEC had said on Monday that demand for oil will rise more slowly than expected in 2021. [OPEC/M] The group and its allies, known as OPEC +, also delayed meetings scheduled for this week until early January.

“There is growing agreement among forecasting agencies that the improvement in global oil demand may not start early next year but in the second half,” Varga said.

The latest snapshots of US oil supplies are expected to show a mixed picture, with gasoline and distillate stocks rising and crude inventories falling. [EIA/S]

The first of two US inventory reports this week, from the American Petroleum Institute, is due at 2130 GMT.