Oil prices fell on Monday on renewed concerns about global fuel demand amid strict coronavirus lockdowns in Europe and new movement restrictions in China, the world’s second-largest oil user, after a jump in cases there.
U.S. West Texas Intermediate (WTI) slipped 97 cents, or 1.85%, to $51.65 a barrel. WTI rose to its highest in nearly a year on Friday.
Brent crude oil futures fell $1.09, or 1.94%, to $55.16 a barrel after earlier climbing to $56.39, its highest since Feb. 25, 2020. Brent rose in the previous four sessions.
“Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.
Mainland China saw its biggest daily increase in COVID-19 cases in more than five months, the country’s national health authority said on Monday, as new infections in Hebei province, which surrounds the capital Beijing, continued to rise.
Shijiazhuang, Hebei’s capital and epicentre of the new outbreak in the province, is in lockdown with people and vehicles barred from leaving the city as authorities move to curb the spread of the disease.
Most of Europe is now under the strictest restrictions, according to the Oxford stringency index, which assesses indicators such as travel bans and the closure of schools and workplaces.
Still, the oil price losses were curbed by plans for U.S. President-elect Joe Biden to announce trillions of dollars in new coronavirus relief bills this week, much of which will be paid for by increased borrowing.
Crude prices remained supported by Saudi Arabia’s pledge last week for a voluntary oil output cut of 1 million barrels per day (bpd) in February and March as part of a deal under which most OPEC+ producers will hold production steady during new lockdowns.
“Oil is still pricing in a great deal of optimism linked to the rollout of Covid-19 vaccines,” Innes said.
“Demand will always improve as the vaccines roll out, and the supply side is under control thanks to OPEC+ and Saudi Arabia’s continued efforts.”