0301 GMT: Crude oil futures fell during midmorning Asia trading Dec. 8 as a continuing rise in COVID-19 infections led countries to impose a myriad of mobility restrictions, dampening sentiment in the market, and as progress over the US fiscal stimulus bill remained elusive.
At 11:01 am Singapore time (0301 GMT), the ICE February Brent contract was down 39 cents/b (0.80%) from the Dec. 7 settle at $48.40/b while the NYMEX January light sweet crude contract was down 33 cents/b (0.72%) at $45.43/b. Both markers had also dropped 0.93% and 1.08%, respectively, on Dec. 7 after most of California retreated into lockdown and as Iranian President Hassan Rouhani said the oil ministry has been instructed to get ready for the production and sale of crude oil at full capacity within three months.
Concerns over the pandemic remained heightened early Dec. 8 after New York Governor Andrew Cuomo said Dec. 7 that current hospitalization trends could force authorities to ban indoor dining in New York City, and shutdowns could follow in regions of New York State where hospitals hit 90% capacity. Concerns were also exacerbated after Denmark announced a partial lockdown in areas struggling to curb the spread.
"One of the reasons for the lower oil prices this morning is definitely the escalation of the pandemic, which is going to be a drag on growth in the short-term," Pan Jingyi, senior market strategist at IG Singapore, told S&P Global Platts on Dec. 8.
Pan said after oil prices closed at a nine-month high on Dec. 4, there have been sustained profit taking activities in the market in line with the broader financial markets.
Meanwhile, UOB analysts said in a Dec. 8 note that hopes over the US stimulus package have stalled after little progress was made, and that US lawmakers now plan to vote for a one-week stopgap legislation on Dec. 9 to temporarily avert the Dec. 11 deadline for US government funding.
The market continues to view the stimulus bill as indispensable to a US economic recovery and resulting oil demand.
"If the fiscal stimulus discussions in the US bear some fruit then it would be a positive for oil, but otherwise the market will continue to ruminate over the same issues concerning the pandemic," Pan added.
