Oil slipped from seven-month highs on Thursday as signs of growing supplies helped to halt a rally driven by optimism that COVID-19 vaccines will revive fuel demand.
Brent futures had risen to nearly $50 a barrel this week after three major pharmaceutical companies announced progress on vaccines that could start to be rolled out before the end of the year.
But Brent was down 74 cents, or 1.5%, at $47.87 a barrel by 1650 GMT on Thursday, having dropped as much as $1. The contract gained about 1.6% in the previous session.
West Texas Intermediate (WTI) crude fell 66 cents, or 1.4%, to $45.05 after gaining 1.8% on Wednesday.
“Despite a number of strong fundamentals rallying the markets, especially vaccine development supporting oil, bearish concerns remain,” said Avtar Sandu, senior commodities manager at Phillip Futures.
Lockdowns as the COVID-19 pandemic worsens, the rising number of rigs employed in the United States and increased production from Libya are risk factors for bulls, he said.
U.S. President-elect Joe Biden has urged people to forgo big family gatherings, wear protective masks and maintain social distancing for the Thanksgiving holiday. But Americans are defying pleas from officials to stay at home.
The United States has recorded 2.3 million new infections in the past two weeks.
While fuel demand has fallen with the second round of lockdowns, non-compliance has translated into a smaller than expected drop in European demand, Rystad Energy said.
“The restrictions currently imposed in Europe – had they been adhered to widely – should have resulted in a 20% to 30% drop in activity. Instead, as our real-time measurements show, we observe a drop of only around 12%,” Rystad said in a note.
Investors also await next week’s OPEC meeting.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia are leaning towards delaying next year’s planned increase in oil output to help the market weather the COVID-19 second wave and rising Libyan output, three sources close to OPEC+ said.
“Tomorrow traders will start positioning themselves for next week’s OPEC+ meeting. The consensus among analysts is a three-month extension of the current ceiling, anything less than that will trigger a sharp sell-off,” said Tamas Varga, analyst at PVM Oil Associates.