By Saket Sundria and Alex Longley
Futures in New York dropped 1%, with the dollar erasing earlier declines to trade higher. After stellar gains so far this month, both West Texas Intermediate and Brent crude futures settled technically overbought on Wednesday, a sign that a possible reversal had been on the cards.
Oil has jumped around 27% this month as signs that Covid-19 vaccines are imminent boosted expectations for a swift recovery in energy demand next year. However, while there are indications that Asian consumption remains healthy, Europe is still lagging. On Wednesday, Germany extended a partial lockdown to curb the spread of coronavirus for at least three more weeks.
“Great news on the vaccines, but it will be months until they are widely available,” said Spencer Welch, vice president of oil markets and downstream consulting at IHS Markit Ltd. “The oil market still has plenty of time left at sub-$50 a barrel, including most of 2021.”
Crude’s rapid price gains this month pose a headache for OPEC+ as it considers whether to postpone a planned increase in output, as they lend weight to arguments from some members demanding to pump more. The group will delay a supply increase by three months, according to a survey of oil analysts, traders and refiners.
In the meantime, a strike in Norway could threaten some oil and gas production. If a long running safety guard strike isn’t resolved before the weekend, two of the country’s fields may have to stop flows.
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