LONDON • Oil prices dropped almost 2 per cent yesterday to below US$50 a barrel, adding to losses from the previous session, as a new coronavirus strain in the United Kingdom revived concerns over demand recovery.
The detection of the new strain prompted several countries to close their borders to Britain, although a British minister said the UK and France are working to reopen one of Europe’s most important trade routes.
Brent crude was down 72 US cents, or 1.4 per cent to US$50.19 a barrel at 0915 GMT (5.15pm Singapore time), while US West Texas Intermediate (WTI) crude fell 76 US cents, or 1.6 per cent, to US$47.21.
Both benchmarks slid nearly 3 per cent on Monday, partly erasing recent gains driven by the roll-out of Covid-19 vaccines seen as key to allowing a return to normal life.
“In the battle between immediate negative concerns and future optimism, the former is now fighting back,” said Mr Tamas Varga of oil broker PVM.
The latest rally culminated in Brent hitting US$52.48, its highest since March, on Friday. Some see potential for prices to fall further.
Mr Jeffrey Halley of brokerage Oanda said: “The environment remains decidedly risk-averse. Given the scale of oil’s two-month rally, a deeper correction cannot be ruled out.”
Oil gained support from the United States Congress approving a US$892 billion (S$1.2 trillion) coronavirus aid package after months of inaction. In focus will be the latest US oil inventory reports, expected to show crude stocks fell by 3.3 million barrels.
The American Petroleum Institute’s report is due at 2130 GMT.
The Organisation of the Petroleum Exporting Countries and allies are set to boost output by 500,000 barrels per day next month.
There is no sign yet of any wavering induced by the price drop. Russian Deputy Prime Minister Alexander Novak said on Monday that the rise in output should not result in a glut.
Crude has surged more than 30 per cent since the end of October, in part due to a series of vaccine breakthroughs. The threat to demand from additional stay-at-home measures is pushing Brent contracts for prompt delivery back into a discount against later deliveries – a bearish pattern known as contango.
REUTERS, BLOOMBERG