LONDON: Oil fell towards $40 a barrel on Friday as new lockdowns in Europe to halt surging COVID-19 infections sparked concern over the demand outlook while drawn-out vote counting in the U.S. election kept markets on edge.
Italy recorded its highest daily number of COVID-19 infections on Thursday while cases surged by at least 120,276 in the United States, the second consecutive daily record as the outbreak spreads across the country.
Brent crude fell 82 cents, or 2%, to $40.11 BY 1440 GMT. U.S. West Texas Intermediate (WTI) dropped 76 cents, or 2%, to $38.03.
Still, Brent was heading for a 7% weekly gain, having fallen in the previous two weeks.
“As market players clamour for election clarity, demand jitters are once again taking their toll on the energy complex,” said Stephen Brennock of broker PVM.
In the U.S. election, Democratic presidential candidate Joe Biden took the lead over President Donald Trump in Georgia and Pennsylvania on Friday, edging closer to winning the White House as a handful of states continue to count votes.
Diminishing prospects of a large U.S. stimulus package were also weighing on the market.
“Any hope of a gargantuan U.S. fiscal stimulus package is almost gone,” said Jeffrey Halley of brokerage OANDA. “Covid-19’s rampage across Europe and the U.S. is likely to deliver a hit to consumption.”
Providing some support, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, could delay bringing back 2 million barrels per day of supply in January, given weaker demand after new lockdowns.
U.S. crude inventories plunged last week by 8 million barrels, against analyst expectations for an increase.
(Additional reporting by Aaron Sheldrick; Editing by Emelia Sithole-Matarise and David Goodman)
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