Oil prices slide on demand worries as US stocks rebound from rout
Both main oil contracts fell five percent for part of the day before clawing back some of their losses, extending this week’s meltdown to plumb four-month lows on virus-driven demand fears
New York: Oil prices dropped Thursday on demand fears as more nations go into lockdown to staunch the spread of the coronavirus, while global stocks mostly rose after the prior session’s routs.
Both main oil contracts fell five percent for part of the day before clawing back some of their losses, extending this week’s meltdown to plumb four-month lows on virus-driven demand fears.
“The new lockdowns have since yesterday caused a carnage in the oil market,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
“Oil demand will lose ground as a result of the new lockdowns… Prices now naturally decline on this grim prospect,” he added.
Meanwhile, stocks were spared Wednesday’s bloodbath which saw losses of more than three percentage points in several major markets.
Wall Street enjoyed a much better session, led by the Nasdaq, which jumped 1.8 percent ahead of major earnings reports from large tech companies.
The gains came as the United States reported a 33.1 percent growth rate in the third quarter, a stunning improvement following a similar drop in the prior quarter.
The record result was driven by consumer spending supported by a massive $3 trillion in government aid, much of which has since expired.
Analysts have cautioned that Washington’s inability to approve a new stimulus package leaves the economy vulnerable in the fourth quarter, especially if the US coronavirus outbreak worsens.
The data are “akin to looking in the rear-view mirror, as the US economy is now slowing and the economic outlook deteriorating amid surging new cases of COVID-19 across almost all US states,” said UniCredit analyst Daniel Vernazza.
– ECB: more stimulus ahead – After spending part of the day in the red, European stocks moved higher in the afternoon after the European Central Bank signaled it would bolster its pandemic response in December.
The recovery is “losing momentum more rapidly than expected” after the partial rebound seen in the summer, ECB president Christine Lagarde said after a virtual meeting of the 25-member governing council.
With risks “clearly tilted to the downside”, she said ECB governors will use next month’s updated growth and inflation forecasts to “recalibrate our instruments” to keep credit flowing in the 19-nation currency club.
Frankfurt ended the day 0.3 percent higher while Paris lost its gains going into the closing bell, as did London, which is outside of the eurozone.
European equities were hammered Wednesday as the German and French governments unveiled tighter restrictions to curb soaring Covid-19 infection rates.
The deadly second wave could potentially spark another painful global recession, as businesses and economies buckle again under the restrictions, analysts warn.
“Risks of a double-dip recession are rising for the global economy,” said Agathe Demarais, global forecasting director at The Economist Intelligence Unit.
“A second wave of the coronavirus pandemic is raging across Europe, prompting several countries, including heavyweights France and Germany, to re-impose stringent measures to contain the outbreak,” she told AFP.