New York — Oil prices fell on Monday as persistent oversupply in the market overshadowed hopes that a rollout of coronavirus vaccines will lift global fuel demand.
Brent crude futures for February fell 61 cents, or 1.2%, to $49.36 a barrel by 11:12 a.m. ET (1612 GMT), while U.S. West Texas Intermediate crude futures for January were down 71 cents, or 1.5%, at $45.86 a barrel.
Signs of rising supply have weighed on the market. Libyan oil production stood at 1.28 million barrels per day on Monday, a National Oil Corporation (NOC) source said, up from 1.25 million bpd in late November.
In the United States, energy firms last week added the most oil and natural gas rigs in a week since January as producers continued to return to the wellpad.
Global onshore crude inventories in December are still well above 2019 and 2018 levels, market intelligence firm Kpler said, with the biggest onshore builds this year seen in China .
“Whilst the sharp jump of global stocks from the beginning of the Covid pandemic in spring to summer mirrored anemic fuels demand early this year, a still historic high volume of crude oil stocks indicates worldwide demand hasn’t yet bounced back to pre-Covid levels,” the firm said in a note.
Major European countries continued in lockdown mode to curb the spread of COVID-19 which has reduced fuel demand. For example, Germany, the fourth largest economy in the world, plans to impose a stricter lockdown from Wednesday to battle the virus.
Prices gained earlier in the session amid supply jitters after a shipping firm said an oil tanker was hit in the Saudi port of Jeddah, which the energy ministry called a terrorist act.
“Traders have for years now been used to tensions flaring in the region and when that happens, oil markets tick up,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
“(The blast) has caused concerns for stability in the major oil hub of Jeddah and for overall traffic security in the region.”
Brent and WTI have rallied for six consecutive weeks, their longest stretch of gains since June.
The United States kicked off its vaccination campaign against COVID-19, lifting hopes that pandemic restrictions could end soon and lift demand in the world’s largest oil consumer.
“Brent crude is supported by both financial and physical flows. The dollar is declining, the Brent crude curve is in backwardation and vaccines are being rolled out,” said SEB chief commodity analyst Bjarne Schieldrop.
“We think that this rally has further to go.”
(Reporting by Devika Krishna Kumar, Noah Browning and Florence Tan; Editing by Steve Orlofsky, Kirsten Donovan and David Gregorio)