Americas News
Covid Fears Up, Oil Prices Down, Good Economic/Vaccine News Eclipsed
Yet again, rising Covid rates in Europe and other parts of the world compelled investors in stocks and commodities to remain cautious, and following their lead crude prices on Tuesday fell by over three percent to their lowest level in two weeks.
Craig Erlam, senior analyst at OANDA, said, "The evolving Covid landscape is a massive downside risk for crude prices."
It was also widely expected that U.S. oil inventory data from the American Petroleum Institute on Tuesday and the Energy Information Administration on Wednesday would show an increase crude stockpiles of 1.6 million barrels last week - although expectations have regularly been proven wrong and insiders with knowledge of the matter are actually reporting a decline.
Adding to overall concerns was fighting with ethnic Armenian forces over the breakaway region of Nagorno-Karabakh in Azerbaijan; however, state energy company SOCAR said on Tuesday the country's oil infrastructure was being guarded by the army.
Brent on Tuesday fell $1.40, or 3.3 percent, to settle at $41.03 per barrel, while West Texas Intermediate fell $1.31, or 3.2 percent, to settle at $39.29 per barrel.
While rising fears of a second Covid wave was the dominant market force today, there was still some positive economic news to be had that could have swayed investors. One example being Katie Farmer, incoming CEO of BNSF Railway, who told media that "We have seen the economy start to pick up relative to rail loadings"; she added that "We have actually seen peak level volumes relative to domestic intermodal happening in an August-September time frame, which we think is a great thing."
But pundits remain downbeat, and three of the world's biggest independent oil traders said consumption won't meaningfully recover for at least another 18 months.
To justify their stance they pointed to New York governor Andrew Cuomo, who on Tuesday raised the possibility of stopping indoor dining again or reimposing other economic restrictions because New York City's rate of positive Covid tests has climbed above 3 percent for the first time in months.
Michael Hiley, head of over-the-counter energy trading at LPS Futures, said,"If they were to put new restrictions on areas of New York, that would surprise the market a little bit and knock it down."
A more positive note Tuesday was news that Moderna's Covid vaccine is proving to work in older adults, and an on-the-spot Covid test is being rolled out globally and is said to be a game changer in the fight against the virus because it will enable low and middle income countries to identify infections almost instantly and break the chain of transmission.
