After rallying in the last few weeks, oil prices were down for a second consecutive day early on Tuesday as tightened restrictions in the U.S. and Europe outweighed the start of vaccination in the UK and the certainty about the OPEC+ production at least for January.
After rising for most of the past three weeks, due to hopes of a vaccine-induced boost in economic growth and energy demand, oil prices have been down this week, with near-term demand concerns trumping hopes for the demand outlook in a few months.
Despite the fact that the first person in the UK received the Pfizer vaccine on Tuesday, several places around the world have just announced tougher restrictions to fight the surge in coronavirus cases. In the UK itself, the nationwide lockdown ended last week, but many counties and cities remain under strict local rules in the so-called Tier-3: Very High alert.
France is unlikely to reduce new daily infection numbers to below 5,000 by December 15—the target set by the government as a reason to lift the lockdown on that day.
The Bavaria region in Germany is moving into a stricter lockdown until January 5, while most areas in California in the U.S. are under a new strict lockdown again.
Last week, OPEC+ managed to seal a compromise deal over its oil production policy early next year, presenting a united front of a unanimous decision after days of disagreements. The original plan for a 2-million-bpd increase of OPEC+ production as of January was watered down to a 500,000-bpd rise for January in a compromise agreement, largely seen as a positive outcome that avoided a break-up of the OPEC+ pact or even of OPEC.
Yet, the sentiment in the oil market has slightly soured in recent days, evident in the fact that in the Brent futures curve, the prompt timespread has returned to contango, with prompt prices cheaper than those further out in time.
By Tsvetana Paraskova for Oilprice.com
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