Oil prices went the bearish route on Monday as continued coronavirus lockdowns around the world spurred renewed concerns about global fuel demand.
At the market yesterday, the Brent crude went southwards by 56 cents or 1 per cent to sell at $55.43 per barrel, while the US West Texas Intermediate (WTI) dipped by 21 cents or 0.4 per cent to trade at $52.03 per barrel.
Latest data showed that coronavirus cases surpassed 90 million globally as key economies continued recording rise in cases.
Despite strict national lockdowns, Britain is facing the worst weeks of the pandemic, and in Germany, cases are still rising.
The world’s largest oil importer, China, further restricted movement amid doubled new COVID cases, prompting renewed concerns about oil demand.
According to reports, Mainland China saw its biggest daily increase in virus infections in more than five months. Other areas like Hebei, Beijing, and Shijiazhuang also recorded more outbreaks with restrictions by the Chinese government.
China has so far supported the oil market and oil prices with its healthy crude demand, while Europe and the US were on lockdowns.
A rising US Dollar also weighed on oil prices on Monday, as a stronger American currency makes crude buying more expensive for holders of other currencies. The strength in the greenback, which is the currency that the commodity is priced, was supported by hopes for more stimulus to boost the world’s largest economy.
The opening day losses follow a strong week for oil prices. Brent and WTI rose by almost 8 per cent last week, supported by Saudi Arabia’s pledge for a voluntary oil output cut of 1 million barrels per day February and March.
This followed the meeting of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) which hopes to keep the market afloat in the face of present circumstances.
According to market analysts, the Saudi cut is expected to bring the oil market into deficit for most of 2021 even though lockdowns are hitting demand.
There is also good news for Brent crude which could rise to $65 per barrel by summer 2021 according to Goldman Sachs. This will be driven by Saudi cuts and the implications of a shift in power to the Democrats in the United States.
Source: BusinessPost
