Prices of crude oil suffered a significant drop this Monday, as the new strains of the covid-19 disease, detected in Japan, Italy, Mexico and other countries, renew the fears of slower than expected economic recovery and stricter lockdowns around the world.
Brent prices fell as much as $1 per barrel, still, both contracts, Brent and West Texas, remain above the $50 per barrel mark. A stronger dollar was also a factor for the decrease, according to Reuters.
Brent lost 57 cents, or 1%, and closed session at $55,42 a barrel, after dropping a whole dollar earlier and hitting a low of $54,99. The U.S. crude from Texas, on the other hand, lost 26 cents, or 0,5% and closed at $51,98 a barrel.
According to analyst Eugen Weinberg, from Commerzbank, “The renewed concerns about demand due to very high numbers of new corona cases and further mobility restrictions, plus the stronger U.S. dollar, are generating selling pressure,” he said quoted by the news agency.
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Covid-19 in Europe stalling demand
All over the world, corona cases have already surpassed the 90 million, and deaths are reaching 2 million. In the U.S. specifically, averages of contagion are higher than any other time of the pandemic. Britain, Germany, are also experiencing their worst weeks of the pandemic, hitting oil demand further in Europe.
“The recovery in oil demand is stalling in Europe in particular due to the prolonged lockdowns. Concerns over Chinese demand are also growing due to the spike in Covid-19 cases in the country, as traders fear new lockdowns,” said Bjornar Tonhaugen, analyst at Rystad Energy.
As said above, a stronger dollar also affected oil prices. As oil is priced in dollars, a strengthen dollar makes oil more expensive for buyers with other currencies. Hopes for a wide stimulus for the U.S. economy contributed to the dollar’s rebound.
Last week was an important one for oil, as it reached its highest point since February 2020, pushed by OPEC’s production cuts, and a U.S. inventories drop. It was the first time in months that oil prices surpassed the $50 per barrel mark, since the coronavirus pandemic hit global demand.