Crude Oil Declines Amid Rising COVID-19 Cases in the United States

Oil prices declined by 1 percent on Tuesday following the persistent increase in the number of coronavirus cases in the United States and the heightened tensions between the two world’s largest economies, the United States and China.

Brent crude oil, against which Nigerian oil is priced, declined by 1 percent to $48.65 per barrel, while the United States West Texas Intermediate (WTI) sheds 1.08 percent to $45.65 per barrel.

Oil gained last week following OPEC+ — OPEC and allies —  decision to increase output by 500,000 barrels per day starting from January 2021 and the decision of the United Kingdom to approve Pfizer and BioNTech COVID-19 vaccine.

The two positive news boosted confidence across the global market as experts interpreted OPEC+ action as ‘expected surge in demand for crude oil’ next year while approval of COVID-19 vaccine means the world could return to business as early as January 2021.

However, the persistent increase in COVID-19 cases in the United States without 100 percent fact that the COVID-19 vaccine could work threw a spanner into the work.

“The beginning of this week is like the morning hangover following a good night out that went a bit too far,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “With the OPEC deal in the bag, now traders looked back at fundamentals, demand and supply, and they were forced to come back to earth as things are not looking good in the short-term.”

Also, the news that Iran had instructed the ministry of oil to prepare installations for the production and sale of crude oil at full capacity within three months weighed on the oil outlook.

“Adding to the pressure on oil prices is the potential Iranian increase to production in three months,” said Edward Moya, senior market analyst at OANDA. “Iran is optimistic the U.S. will ease restrictions if they return back to the 2015 nuclear deal.”