By Gina Lee
Investing.com – Oil was down on Monday morning in Asia, with continuing fuel demand worries overshadowing news that U.S. President Donald Trump signed off on the latest stimulus measures.
Brent oil futures fell 0.39% to $51.17 by 9:31 PM ET (2:31 AM GMT) and WTI futures were down 0.23% to $48.12. Last week, the black liquid posted its first weekly loss since October as the B.1.1.7 strain of COVID-19, alongside the discovery of a second mutant strain of the virus possibly originating from South Africa, raised the possibility of more countries imposing lockdowns.
England has already imposed tighter restrictions throughout most of the country to curb the spread of both strains, while China added itself to the list of countries suspending passenger flights to the U.K. The U.S. is also bracing for a post-Christmas surge of COVID-19 cases.
However, news that Trump has reportedly singed the $2.3 trillion pandemic aid and spending package, thus averting a partial federal government shutdown, boosted investor sentiment. The package was approved by both the House of Representatives and the Senate during the previous week, and Trump had threatened to withhold his signature as he fought to increase the amounts on the stimulus checks in the package.
Oil is ending 2020 on a sour note, as the short-term demand risk of more lockdowns and travel restrictions outweighs both the stimulus news and optimism as COVID-19 vaccines are rolled out. The Organization of Petroleum Exporting Countries and allies, also known as OPEC+, will also ease production curbs currently in place by 500,000 barrels per day from January onwards.
The pessimism is reflected on crude’s futures curve. Brent futures’ prompt timespread is 6 cents a barrel in contango and the spread was as much as 13 cents in backwardation earlier in the month.
Trump has also raised geopolitical tensions in the Middle East, accusing Iran of being responsible for Sunday’s rocket attack near the U.S. embassy in Baghdad. The Iranian Foreign Ministry has denied the claims.
Meanwhile, Iranian Oil Minister Bijan Namdar Zanganeh said earlier in the month that Iran plans to double its production in 2021. The move clashes with OPEC+ efforts to increase supply gradually and avoid an oversupply in the market.