Oil prices plummet as new virus strain cuts fuel demand

Tokyo/London — Oil prices tumbled by $2 on Monday, as a fast-spreading new coronavirus strain that has shut down much of Britain and led to tighter restrictions in Europe sparked worries about a slower recovery in fuel demand.

Brent crude was down $2.06, or 3.9%, to $50.20 a barrel by 9.26am GMT, and US West Texas Intermediate (WTI) crude was down $1.95, or 4%, to $47.15 a barrel.

Monday’s declines come after seven weeks of gains in prices amid optimism stemming from the rollout of Covid-19 vaccines.

“Oil prices are wilting amid fears that the new strain will derail the fuel demand recovery. If anything, it reaffirms that the path towards demand normalisation is anything but smooth,” said Stephen Brennock of oil broker PVM.

British Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel and the flow of freight in and out of Britain as Covid-19 cases surged by a record number for one day. Officials say the new virus strain is up to 70% more transmissible than the original.

Johnson is also seeking a final accord on Brexit.

The negative sentiment overshadowed a weekend deal by US congressional leaders for a $900bn coronavirus aid package.

Adding to pressure, the US oil and gas rig count, an early indicator of future output, rose by eight to 346 in the week to December 18, the highest since May, Baker Hughes said, reflecting crude prices that have traded above $45 a barrel since late November.

Russian deputy prime minister Alexander Novak said on Saturday that global oil demand was still 6-7 million barrels per day (bpd) below pre-crisis levels. 

Reuters