Oil prices edged lower on Tuesday, extending the previous session's losses after the US state of California tightened its pandemic lockdown through Christmas and Covid-19 cases surged in the United States and Europe.
Brent crude fell 3 cents to $48.76 a barrel by 10:34 a.. EST (1534 GMT), while US West Texas Intermediate (WTI) crude futures lost 21 cents to $45.55. Both benchmarks retreated by about 1% on Monday.
Oil prices were briefly buoyed after the world's first fully-tested Covid-19 vaccine shot was administered to a grandmother in Britain, but investors quickly returned their focus to ebbing fuel demand caused by the pandemic.
"Much of the weakness has associated with some slippage in risk appetite now that the bulk of the favorable vaccine news has been discounted in forcing the market to focus on a significant up-spike in coronavirus case counts," said Jim Ritterbusch of Ritterbusch and Associates.
A sharp rise in coronavirus cases globally has led to a string of renewed lockdowns, including strict measures in California, Germany and South Korea.
France may have to delay unwinding some lockdown restrictions next week, government sources said, after signs the downward trend in new cases had flattened after shops were allowed to reopen late last month.
Analysts said they were closely watching US lawmakers' efforts to approve a new economic stimulus package needed to drive jobs growth and energy demand.
"As supply expectations are now firmer after the OPEC+ meeting, at least for January, prices are not expected to deviate much for a while and swings will be focused on ‘lighter’ market events, even if these are mostly of psychological value – such as the first vaccinations in the UK," said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
The OPEC+ group of oil producers is likely to hold their next meeting on Jan. 4, after agreeing last week to raise oil output by 500,000 barrels per day (bpd) next month.
Data from the American Petroleum Institute due on Tuesday and from the US government on Wednesday is expected to show that US crude stocks fell last week while refined product stockpiles rose, according to a preliminary analyst poll by Reuters.