Oil prices fell on Friday as concerns about Chinese cities in lockdown due to coronavirus outbreaks tempered a rally driven by strong import data from the world’s biggest crude importer and U.S. plans for a large stimulus package.
U.S. West Texas Intermediate crude was down 79 cents, or 1.46%, at $52.91 a barrel.
Brent was down 86 cents, or 1.56%, at $55.56, after gaining 0.6% on Thursday.Brent and U.S. crude saw their first weekly declines in three weeks.
While producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts versus lockdowns, financial contracts have been boosted by strong equities and a weaker dollar, which makes oil cheaper, along with strong Chinese demand.
“The recent resurgence in coronavirus infections, appearance of new variants, delayed vaccine rollouts, and renewed lockdown measures in most major OECD economies has clouded the economic and demand recovery,” said Stephen Brennock of oil broker PVM.
“Simply put, near-term demand expectations aren’t too promising.”
A nearly $2 trillion COVID-19 relief package in the United States unveiled by President-elect Joe Biden may increase oil demand from the world’s biggest crude consumer, but worse than expected jobs data cast a shadow over the plans.
China reported the highest number of daily COVID-19 cases in more than 10 months on Friday, capping a week that has resulted in more than 28 million people under lockdown as it suffered its first coronavirus death on the mainland since May.
“The COVID-19 pandemic’s spread is taking centre stage again and traders are getting increasingly worried about the long duration of European lockdown and about the new restrictions (in) China,” Bjornar Tonnage from Rystad Energy said.
“The market is structurally bullish, but it may be getting too ahead of forward-looking fundamentals.”