Europe's Covid-19 Lockdowns Hit Oil Prices, Stocks -- Update
By Joe Wallace and Will Horner
New coronavirus lockdown measures in Europe dragged the region's
stocks lower Thursday and threatened to hamper fuel demand,
reigniting worries about slowing economic growth around the
The Stoxx Europe 600 index fell 2.1%, a third straight loss for
the pan-European gauge and its biggest daily drop since Sept. 21.
Shares in major oil companies Royal Dutch Shell PLC, BP PLC and Eni
SpA posted some of the biggest losses.
Brent-crude futures, the global benchmark of oil prices, ended
the day down 0.4% at $43.16 a barrel, after earlier falling as much
as 4.1%. Rising coronavirus cases in the U.S. and deadlocked
negotiations over economic stimulus have kept oil prices in a tight
trading range recently. U.S. crude futures closed down 0.2% at
$40.96 a barrel, paring much of their drop after government data
showed domestic stockpiles fell more than expected last week.
U.S. crude has stayed around $40 in recent months, with traders
concerned that demand will stagnate moving forward.
In another sign of concern about the European economic outlook,
the dollar rose Thursday and advanced against the euro and British
pound. Months after European authorities wrestled a measure of
control over the spread of the novel coronavirus by imposing some
of the Western world's toughest restrictions, cases are once again
soaring. Governments have responded in recent days with curbs on
travel and leisure designed to suppress a second wave.
The restrictions are a far cry from the full lockdowns that
brought entire sectors to a standstill this spring. Still,
investors and traders said they threaten to tap the brakes on
Europe's economic revival and pinch demand for fuels used in
transportation and industry.
"European oil demand had been recovering and the concern isn't
just about Europe, it's about whether this is going to spread
around the world again," said Phil Flynn, senior energy analyst at
Price Futures Group. "There are growing concerns about permanent
The U.K. government on Thursday said London would be put on
level two of the country's three-tier alert system from Saturday,
requiring people to stop mixing with other households indoors.
Health Secretary Matt Hancock said infections in the British
capital were doubling every 10 days. France on Wednesday declared a
state of emergency and imposed a nightly curfew for the Paris
region and eight other metropolitan areas across the country.
The lockdowns stand to reduce gasoline, diesel and jet-fuel
consumption in the coming months, traders and analysts said. Oil
demand in Europe was about 10% lower in the third quarter than a
year before, the International Energy Agency said this week.
Corporate debt also sold off in Europe and the U.S. on Thursday.
In the credit derivatives markets, the cost of protecting European
investment-grade bonds against default over the next five years
rose to nearly EUR57,000 annually per EUR10 million of bonds. That
is up from just over EUR53,000 annually at Wednesday's close,
according to IHS Markit.
Oil prices are particularly sensitive to the outlook for
economic growth thanks to the fuel's use in transportation, trade
and industry. Demand is recovering apace in Asia, but has stalled
in the West partly because of the resurgence of Covid-19.
Some of the world's biggest oil traders expect global demand
will remain well below pre-coronavirus levels at least for the next
six months. Global demand will fall 5-6% from last year's levels
through the winter before picking up in the second quarter if the
virus begins to abate, said Russell Hardy, chief executive of Vitol
Group, at an industry event Thursday.
"It's going to be a bumpy ride," Mr. Hardy said. "It's going to
be tricky over the coming winter in the Northern Hemisphere.
There's obviously still a lot of virus around which is
allowing...some reduction in that demand recovery."
--Amrith Ramkumar contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com and Will Horner at
(END) Dow Jones Newswires
October 15, 2020 15:23 ET (19:23 GMT)
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