By Geoffrey Smith
Investing.com -- Crude oil prices softened again on Tuesday as the implications of a new strain of the Covid-19 virus for global demand sunk in, while a sharp drop in U.S. consumer confidence also kept the mood subdued.
By 11:25 AM ET, U.S. crude future were down 1.2% at $47.38 a barrel, while the international benchmark Brent was down 1.0% at $50.39 a barrel.
U.S. Gasoline RBOB Futures also fell by 0.9% to $1.3475 a gallon.
After a night little major news from the supply side, attention has been focused on demand, with analysts and scientists scrambling to work out how serious the effect of a new virus strain could be.
Rystad Energy oil markets analyst Louise Dickson argued that the market may have been "overly cautious" in its initial reaction, which sent prices down by over 5% at one stage on Monday.
"It is doubtful that it changes much the global picture of the pandemic," Dickson wrote in emailed comments. "The price reaction may be triggered by the new Covid-19 strain but the full effect of the decline may be more a result of the market’s realization that despite the vaccine breakthrough, there is still some uncertainty out there, a thought largely ignored in this month’s price rally."
The chaos on the U.K. borders with the EU showed little sign of abating on Tuesday, with talks still ongoing over how to reopen the Channel Tunnel, through which tens of thousands of trucks pass every day. Countries from Turkey and Russia to France have severed all transport links with Europe's third-largest economy, while the U.K. has instituted a sharper lockdown that many other European countries may have to follow. German government scientists said earlier Tuesday that they expected the new strain - which is more contagious than the original one but does not appear to be any more virulent - was already in Germany, even though it hadn't been detected yet.
At 4:30 PM ET (2130 GMT), the American Petroleum Institute will release its weekly assessment of U.S. oil inventories. Analysts surveyed by S&P Global (NYSE:SPGI) Platts said they expect a draw of 4.7 million barrels, helped by a steady increase in exports. If that's borne out, then crude inventories will stand some 10% above their five-year average, down from 10.3% last week.