Futures Movers: Oil ticks lower amid potential reserve releases, COVID worries

Crude continued to feel pressure as worries mounted over a rise in COVID-19 cases in Europe, which have resulted in renewed restrictions on activity. A full lockdown took effect in Austria on Monday, while protests against tightened COVID restrictions in the Netherlands and Belgium turned violent over the weekend.

“While further lockdowns aren’t guaranteed, case numbers in some countries are worryingly high and governments may be tempted to follow in Austria’s footsteps,” said Craig Erlam, senior market analyst at Oanda, in a note.

“This is what OPEC+ has warned of for months when forced to defend not raising production as prices have spiked. Now we’re seeing prices correct and that could continue in the coming weeks if countries announce a tightening of restrictions,” he said.

Worries were underlined after German Chancellor Angela Merkel on Monday was reported to have told senior members of her Christian Democratic Union party that the COVID situation was “highly dramatic” and “worse than anything Germany has experienced so far.”

Meanwhile, Japanese officials were working on ways to get around restrictions on releasing crude from the country’s strategic reserve, according to a news report. Oil has seen pressure as the Biden administration has coordinated with China, Japan and other oil-consuming countries on a coordinated release of crude in an effort to push down prices.

Crude can be released from Japan’s reserve only during periods of shortage or natural disaster, analysts said. Reuters reported that officials were considering a move that would see Japan release crude above the reserve’s minimum threshold as a potential workaround.