Oil stumbles on new lockdowns to counter surging coronavirus numbers

Singapore — Oil prices fell on Monday as a continued surge in coronavirus cases globally forced a series of renewed lockdowns, including strict new measures in Southern California in the US, the world’s top oil consumer.

Brent crude oil futures were down 20c, or 0.4%, at $49.05 a barrel by 6.01am, while West Texas Intermediate oil futures fell 20c, or 0.4%, to $46.06 a barrel. Both benchmarks gained for a fifth consecutive week last week.

“Crude pared earlier vaccine rollout gains after Los Angeles county had another record high in coronavirus cases and South Korea raised their alert level,” said Edward Moya, senior market analyst at Oanda.

“Covid-restrictive measures and lockdowns across the globe seem poised to keep crude prices heavy in the short term.”

The restrictions in California call for bars, hair and nail salons and tattoo shops to close again.

The southern German region of Bavaria announced on Sunday it will impose a tougher lockdown from Wednesday until January 5, while South Korean authorities heightened social distancing rules for the capital Seoul and surrounding areas that will last until at least month’s end.

Also weighing on prices, US energy firms last week added oil and natural gas rigs for the eleventh time in 12 weeks as producers return to the well pad even as most are cutting spending this year and next.

Iran, meanwhile, has instructed its oil ministry to prepare installations for production and sale of crude oil at full capacity within three months, state media said on Sunday.

“Adding to the pressure on oil prices is the potential Iranian increase to production in three months. Iran is optimistic the US will ease restrictions if they return to the 2015 nuclear deal,” Moya added.

Still, rapid demand recovery in China and developments in Covid-19 vaccines capped price losses.

China’s exports in November rose at their fastest pace since February 2018, helped by strong global demand and as the recovery in manufacturing in the world’s second-largest economy outpaced those of its major trading partners.

Reuters