Crude retreats as pandemic concerns overshadow US stimulus bill

Crude futures settled lower Dec. 28 as pandemic-fueled demand concerns overshadowed the positive news of the passing of a US stimulus package.

NYMEX February WTI settled 61 cents lower at $47.62/b and ICE February Brent pulled back 43 cents to be settled at $50.86/b.

Demand recovery outlook continued to face headwinds from the emergence of a more contagious strain of COVID-19. Several countries, including Canada, France, Japan, Spain and Norway, have reported cases of the new strain, and there are now fears that the variant may have been transmitted undetected to other countries, many of which do not conduct genomic sequencing as actively as the UK.

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Another coronavirus mutation has been discovered in South Africa, and as a result, other areas like the UK and Hong Kong have banned arrivals from the African nation.

"Thin trading conditions should see oil prices consolidate for the rest of the week, but risks for a dollar rebound and nervousness ahead of next week's OPEC gathering could provide some headwinds," OANDA senior market analyst Ed Moya said in a note.

NYMEX January RBOB settled 1.12 cents lower at $1.3677/gal and January ULSD finished down 1.1 cents at $1.4790/gal.

US gasoline inventory builds likely resumed in the week ended Dec. 25 as the Christmas holiday weighed on already-weak driving demand, an S&P Global Platts analysis showed Dec. 28. Total US gasoline inventories are expected to have climbed 2.3 million barrels last week to around 240 million barrels, analysts surveyed by Platts said.

Apple mobility data showed US driving activity in the week ended Dec. 25 was down nearly 3% from the week prior, snapping back-to-back weekly gains in driving demand.

Total commercial crude inventories are expected to have declined 3.8 million barrels to around 495.7 million barrels in the week ended Dec. 25, analysts said. But despite likely drawing for a third straight week, inventories are expected to remain ample at nearly 11% above the five-year average.

Oil futures had rallied earlier in the session after US President Donald Trump on Dec. 27 signed a pandemic stimulus bill, ending several days of brinkmanship with Congress regarding the size of the relief payments and ensuring the continuation of federal unemployment benefits that had expired on Dec. 26.

The passage of the stimulus bill prompted US investment bank Goldman Sachs on Dec. 28 to revise its outlook for first quarter US GDP growth upward to 5% from 3%, according to media reports.