Oil rally stalls despite signs that COVID-19 vaccine could increase fuel demand

Oil slipped on Thursday, stalling a rally driven by a surprise fall in US crude inventories that added to bullishness over expectations that progress on vaccines may end the coronavirus pandemic and revive fuel demand.

Having spent the Asian trading day higher, Brent futures were down 1 cent at $48.60 a barrel by 0746 GMT, after rising around 1.6 percent in the previous session.

West Texas Intermediate crude was off by 4 cents at $45.67 a barrel, after reaching a high of $46.09 earlier and gaining 1.8 percent on Wednesday.

Both benchmarks have risen about 8 percent this week after AstraZeneca said on Monday its COVID-19 vaccine could be up to 90 percent effective, adding to the potential armory to end the worst pandemic in a century.

“Despite a number of strong fundamentals rallying the markets, especially vaccine development supporting oil, bearish concerns remains,” said Avtar Sandu, senior commodities manager at Phillip Futures.

Lockdowns as the pandemic worsens, the rising number of rigs employed in the US, along with increased production from Libya, were risk factors for bulls, he said.

US oil stockpiles fell 754,000 barrels last week, data showed. Analysts in a Reuters poll had predicted a 127,000-barrel rise. Stockpiles at the Cushing, Oklahoma, delivery point for WTI, fell by 1.7 million barrels.

But gasoline demand for the week fell by 128,000 barrels per day (bpd) to 8.13 million bpd, the lowest since June.

US President-elect Joe Biden has urged people to forgo big family gatherings, wear protective masks and maintain social distancing for the Thanksgiving holiday. But Americans are defying pleas from officials to stay at home.

The US has recorded 2.3 million new infections in the last two weeks.

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