Oil slumped as a string of renewed lockdown measures in Europe stoked concerns about the demand outlook while the market’s underlying structure shifted to indicated near-term weakness.
Futures in New York and London fell as much as 5 percent, with the prompt spread on both flipping into contango. Concerns are re-emerging over the prospects for a speedy rebound in consumption as Europe’s demand recovery is set to take another hit with Germany, France, and Italy all having widened lockdown measures this month. Meanwhile, coronavirus cases are surging in India and threatening the economy’s recovery from the recession.
“Germany is the biggest economy in the Eurozone, and renewed lockdowns there is nothing but bad for demand,” said Bob Yawger, head of the futures division at Mizuho Securities.