Oil and natural gas prices closed the day in sharp declines today, pressured by fears of a slowdown in the economic recovery as the advance of covid-19 on the European continent begins to provoke the adoption of restrictive measures.
Austria was the first country to announce, today, the return of the lockdown in the whole country. Germany may be the next to adopt the lockdown against a backdrop of strong contagion growth as winter approaches.
The energy sector was the most affected by the news as its prices already reflected the greater demand caused by the return to normality. Brent oil –world reference– for January closed down 2.89%, to US$ 78.89 per barrel. WTI oil – a reference for the United States – for the same month closed down 3.15%, to US$ 75.94 per barrel. It is the lowest price level, in both contracts, since the beginning of October.
With today’s drop, prices retreated for the fourth consecutive week. It is the longest period of weekly decline since March 2020, when prices registered losses for five consecutive weeks.
According to Craig Erlam, an analyst at consultancy Oanda, if more countries adopt the lockdown, prices may undergo a deeper correction since, in addition to a reduction in demand, the market will also be, according to OPEC+ estimates, with excess supply.
With covid worsening in Europe and restrictions tightening in Germany and Austria, there is a general feeling that things may not be going well, said Sebastien Galy, macroeconomic strategist at manager Nordea. “This affects market sentiment as well as consumer confidence.”
Gas prices have also suffered from the lockdown, even as new weather forecasts from Bespoke Weather Services signaling much lower temperatures in Europe in early December and fears that Russia will send less fuel to the continent in retaliation for Germany’s halting certification of the Nord Stream 2 pipeline.
In the Netherlands, TTF gas for December fell 9.4% at 86.20 euros per megawatt hour, still the highest price in 30 days. In London, on Ice Futures, December fell 8.5 percent to 2,195 pounds per 100,000 thermal units.