Oil retreats from 9-month high

Oil retreats from 9-month high as Covid-19 surge stokes demand fears

The continued rollout of vaccines is also helping protect the market from steep falls

Increasing Covid-19 cases across the world weigh on fuel demand. Credit: Reuters

Oil prices eased on Friday but stayed within touching distance of nine-month highs hit in the previous session as soaring Covid-19 cases weigh on fuel demand and US lawmakers battle over a $900 billion economic stimulus package.

US West Texas Intermediate (WTI) crude futures slipped 17 cents or 0.4 per cent, to $48.19 a barrel at 0513 GMT, while Brent crude futures fell 26 cents, or 0.5 per cent, to $51.24 a barrel.

More than 73.65 million people have been reported to be infected by the novel coronavirus globally and 1,654,920​ have died, according to a Reuters tally on Friday.

The spike in cases is leading to tough restrictions on travel, weighing on near-term fuel demand and market sentiment, analysts said.

Both contracts had climbed on Thursday, on optimism around progress on a Covid-19 relief bill, strong Asian refining demand and a slide in the US dollar to a two-and-a-half-year low. With oil priced in dollars, a weaker greenback makes oil cheaper in other currencies.

Analysts said risk appetite was still growing with the prospect of an imminent US stimulus deal, which would help fuel demand, but lawmakers had yet to reach an agreement late on Thursday.

The continued rollout of vaccines is also helping protect the market from steep falls.

The US Food and Drug Administration was expected to grant emergency use authorisation for Moderna's coronavirus vaccine after emergency use was endorsed by an independent panel.

ANZ Research said with US Covid-19 infections hitting new daily records, and restrictions tightening in Japan, the pressure is growing on the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, together called OPEC+.

OPEC+ plans to add 500,000 barrels per day of supply to the market in January, in the first step toward returning 2 million bpd to the market.

"While OPEC+ has shown it's ready and willing to adapt to evolving market conditions, which should protect crudes value in the longer term, near-term challenges may still weigh on recent bullish momentum," OANDA analyst Craig Erlam wrote in a note.