New COVID-19 strain triggers oil demand worries

Oil prices fell by over three percent on Monday as a rapidly spreading new COVID-19 strain that has shut down much of the United Kingdom triggered worries about a slower recovery in fuel demand.

Brent crude, the benchmark for Nigeria’s oil grades, dipped by $1.74 or 3.3 percent to $50.52 per barrel at 08:45 West Africa Time while United States West Texas Intermediate (WTI) crude declined by $1.66 or 3.4 percent to $47.44, having risen by 1.5 percent on Friday to its highest point since February.

Bonny Light, Nigeria’s principal oil grade, gained $0.73 or 1.43 percent on Friday to close at $51.74 a barrel.

But Qua Iboe, another major national oil grade, shed $0.28 or 0.54 percent to close at $51.49.

Monday’s drop in oil prices followed seven weeks of gains boosted by hopes of rollout of COVID-19 vaccines.

“The oil market has been on a bull trend in the past month or so, ignoring negative factors, amid an optimism that a widening vaccine rollout would revive global growth,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

“But investors’ rosy expectations for 2021 have suddenly vanished due to a new variant of the virus.”

In New York and London, money managers had increased their net long US crude futures and options positions by 2,046 contracts to 321,332 in the one week ended 15th December, according to the U.S. Commodity Futures Trading Commission.

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.

The British Prime Minister, Boris Johnson, is expected to chair an emergency response meeting on Monday to deliberate on international travel and the movement of freight in and out of the UK as COVID-19 infections soared by a record number for one day.