Oil prices drop as new coronavirus strain raises demand concerns

21 December 2020 (Last Updated December 21st, 2020 16:07)

Oil prices fell by $2 due to a fast-spreading new strain of coronavirus in the UK that has led to stringent travel restrictions in Europe and raised concerns about fuel demand recovery.

Oil prices drop as new coronavirus strain raises demand concerns
Credit: AdmiralFox from Pixabay.

Brent crude dropped by $2.06, or 3.9%, to touch at $50.20 a barrel by 0926 GMT, while US West Texas Intermediate (WTI) crude fell by $1.95, or 4%, to reach at $47.15 a barrel, reported Reuters.

This drop comes after seven weeks of gains in prices amid optimism over the rollout of vaccines to contain Covid-19.

Stephen Brennock of oil broker PVM was quoted by the news agency as saying: “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 normalisation is anything but smooth.”

Meanwhile, UK Prime Minister Boris Johnson is set to hold an emergency response meeting today to discuss on international travel as Covid-19 cases are surging.

According to officials, the new virus strain is transmissible by up to 70% more than the initial strain.

Furthermore, the UK PM is seeking a final deal on Brexit.

The weekend deal among US congressional leaders for a $900bn aid Covid-19 package was overshadowed by the negative sentiments in the UK.

Meanwhile, the count of US oil and gas rigs grew by eight to 346 in the week to 18 December. According to Baker Hughes, this increase is the highest since May.

According to Russian Deputy Prime Minister Alexander Novak, the oil demand across the world was around seven million barrels per day (bpd) below the pre-crisis levels.