Oil prices tumbled by more than $3 on Monday before trimming losses 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.
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Brent crude was down $1.83, or 3.5 percent, to $50.43 a barrel by 1209 GMT while US West Texas Intermediate (WTI) crude was down $1.70, or 3.5 percent, to $47.40 a barrel.
Both contracts fell more than $3 earlier in the session.
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Monday’s declines come after seven weeks of gains in prices amidoptimism stemming from the rollout of COVID-19 vaccines.
“Reports of a new strain of the coronavirus has weighed on risk sentiment and oil. New mobility restrictions across Europe are also not helping as European oil demand will suffer,” said UBS oil analyst Giovanni Staunovo.
“Investors need to be mindful that the road to higher oil demand and prices will remain bumpy,” he added.
Brent climbed above $50 last week for the first time since March amid optimism stemming from the rollouts 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 normalization 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 percent more transmissible than the original.
Johnson is also seeking a final accord on Brexit.
The negative sentiment overshadowed a weekend deal among US congressional leaders for a $900 billion 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.
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