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Gulf Today Report

Oil prices fell on Tuesday as worries over near term fuel demand in coronavirus-hit Europe and the United States haunted the market after an overnight surge driven by encouraging news on a COVID-19 vaccine.

 US West Texas Intermediate (WTI) crude futures fell 55 cents, or almost 1.4%, to $39.74 a barrel by 0545 GMT, Brent crude futures fell 44 cents, or 1%, to $41.96.

 The two benchmarks surged by 8% on Monday, the largest daily gain in more than five months. The gain was due to drugmakers Pfizer and BioNTech announcement of an experimental COVID-19 vaccine being 90% effective.

In a note, JP Morgan said a successful vaccine will switch things up for oil- a market where half of the demand comes from moving people and things around.

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"But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise,” he added.

 Rystad Energy said fresh lockdowns in Europe due to the surge in coronavirus could lead to loss of a further 1 million barrels per day of oil demand by the end of the year.

The decline on Tuesday was due to a comment passed on Monday which stated that OPEC+ might be tweaking their supply cut pact if demand falls before the vaccine is available.

OPEC+ has conceded to reducing the supply by 7.7 million barrels per day from August through December and then reduce to 5.7 million bpd from January.