Crude tumbles as COVID-19 squeezes demand, US election results uncertain

0516 GMT: Crude oil futures were lower in mid-afternoon on Nov. 6, as the list of European nations imposing lockdowns to stem the spread of COVID-19 grew larger, even as outcome of the US election remained mired in uncertainty with a deeply divided political scene.

At 1:16 pm Singapore time (0516 GMT), the ICE January Brent crude futures fell $1.04/b (2.54%) from the Nov. 5 settle at $39.89/b, while the NYMEX December light sweet crude contract was $1.06/b (2.73%) lower at $37.73/b.

Danish authorities have introduced a localized lockdown in some areas after the discovery of a coronavirus mutation in minks that can spread to humans. Starting Nov. 6 and to last until Dec. 3, the lockdown will see bars and resturants, public transport and public indoor sports halt operations. All minks in Denmark, up to 17 million, are to be culled.

In Greece, Prime Minister Kyriakos Mitsotakis announced a nationwide lockdown from Nov. 7 aimed at easing pressure on the country's healthcare system amid a surge in coronavirus infections.

"COVID-19's rampage across Europe and the US is likely to deliver a hit to consumption," Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, said in a note Nov. 6.

Stephen Innes, chief global markets strategist at AxiCorp, added to those concerns Nov. 6,"By far, the most critical questions for oil are how quickly a COVID-19 vaccine is widely available [and] whether a US stimulus deal can be achieved in a fractious and uncertain political environment."

That latter point referred to the US presidential election, held Nov. 3, but with a winner still to be declared.

"There remains uncertainties in the US political scene, namely the issues of a divided Congress hampering fiscal aid and challenges of the results," Pan Jingyi, market strategist at IG, said in a note Nov. 6.

With OPEC+'s next meeting on Nov. 30 to Dec. 1 just around the corner, investors will hope for tangible action to combat the demise of oil prices, namely whether to extend production cuts into January or to proceed with planned increases in output. However, analysts urge lowered expectations.

"With no concrete evidence that OPEC+ is moving to slow or reverse the pace of production increases, the supply/demand imbalance has capped oil's pre-election rally," Halley added in his note.