Oil prices dropped about (three per cent) on Monday due to the fast-spreading new-mutated coronavirus strain that has shut down much of the United Kingdom. This fuelled worries over a slower recovery in fuel demand of which the supply is already in line, amid tighter restrictions in Europe.
“The oil market has been on a bull trend in the past month or so, ignoring certain negative factors, amid an optimism that a widening vaccine provision would revive global need for the same. However, the investors’ rosy expectations for 2021 have suddenly vanished dimmed owing to the new variant of the virus’ emergence,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.
- Brent crude slid $1.54, or three per cent, to $50.72 a barrel by 0510 GMT after rising 1.5pc and touching its highest since March last Friday.
- US West Texas Intermediate (WTI) crude was down $1.42, or 2.9pc, to $47.68 a barrel after also climbing 1.5pc on Friday to its highest level since February.
Monday’s declines came after oil prices marked seven straight weeks of gains last week as investors focused on the rollout of Covid-19 vaccines.
“A tougher lockdown in Britain to fight a new strain of coronavirus and travel restrictions in other European countries led funds to unwind their long positions,” said Chiyoki Chen, chief analyst at Sunward Trading, adding that concern over dragging Brexit talks also dented market sentiment. “Brent may fall below $50 a barrel and WTI may drop below $45 this week as investors want to adjust positions ahead of Christmas holidays,” Chen said.
Prime Minister Boris Johnson on Flow of Cargo
British Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel and the flow of shipping freight in and out of Britain as Covid-19 cases surged by a record number for one day. This comes as Johnson also seeks to hammer out a final accord on Brexit.
The CoronaVirus Variant and The EU
The variant, which officials say is up to 70pc more transmissible than the original, also prompted concerns about a wider spread, forcing several European countries to begin closing their doors to travellers from the United Kingdom.
With progress in vaccine rollouts, money managers had raised their net long US crude futures and options positions in the week to December 15, according to the US Commodity Futures Trading Commission (CFTC).
USA Oil Reserves
This is also subject to the present Government of the United States. Where, in the United States the transition decision is yet to be made by the mid of January. Simply because of the reason that with USA’s reserve crude wells, if touched in cohesion with the Middle East Aramco may bring about some changes, like had been seen in the earlier years.
Adding to pressure, the oil and gas rig count, rose by eight to 346 in the week to December 18. This was said by May and Baker Hughes, as producers continuously return to the well-pad, with crude prices trading above $45 a barrel since late November.
According to The Reuters news agency