Oil steadies as Covid-induced demand worries persist

Oil steadied after earlier declines on Thursday fuelled by fresh travel curbs to prevent new coronavirus outbreaks and delays to vaccine rollouts.

Brent crude futures were up $0.02 at $55.83 a barrel by 1039 GMT, having hit a session low of $55.31. US West Texas Intermediate (WTI) crude futures fell 8 cents, or 0.2%, to $52.77 a barrel, after falling to $52.22 earlier.

Oil prices were supported by data on Wednesday showing a huge 10-million-barrel decline in US crude inventories last week, which analysts said was due to a pickup in US crude exports and a drop in imports.

But attention is returning to demand as contagious variants drive a rise in coronavirus infections and a slower rollout of vaccines in Europe and travel curbs in China are expected to limit fuel consumption.

“Any sort of demand-related optimism remains on pause amid the continued rise of new Covid-19 cases across key demand centres and restricted mobility and public activity,” consultants JBC Energy said.

Stricter vaccine checks by the European Union and delivery hold-ups from AstraZeneca and Pfizer have slowed the rollout of shots.

Adding to the bearishness over demand, China, the world’s second-largest oil consumer, faces a surge in coronavirus cases and is seeking to limit travel as it heads into what is normally the busiest travel season of the year, the Lunar New Year holiday.

The Chinese Ministry of Transport has forecast the number of trips that will be taken will be up 15% from last year, when the virus was raging, but down 40% from 2019.

A strengthening dollar also weighed on prices. Buyers using other currencies must pay more for dollar-denominated oil when the greenback rises.

Data out later on Thursday will likely show the economy of the United States, the world’s biggest oil user, contracted in 2020 at its sharpest pace since 1946 because of the pandemic.