Oil prices dropped further after touching an 11-month high last week due to rise in Covid-19 infections, which has dimmed the market outlook.
Brent crude dropped by $0.30, or 0.5%, to reach $54.79 a barrel by 06:22 GMT while US oil fell by $0.21, or 0.4%, to reach $52.15 a barrel, reported Reuters.
In the recent weeks, the benchmarks had rallied, buoyed by the commencement of Covid-19 vaccine rollouts and a voluntary crude output cut by major oil exporter Saudi Arabia. However, new surging infections across the world have raised doubts about the fuel demand.
OANDA senior market analyst Jeffrey Halley was quoted by the news agency as saying: “The Relative Strength Indexes (RSI’s) on both contracts were in overbought territory, indicating a correction was on its way.”
Drillers in the US added more pressure to the oil market by putting more oil and natural gas rigs to work for the eighth consecutive week last week. However, the count of operating rigs is less than 50% of the level seen a year ago.
ANZ Research was quoted by the news agency as saying in a note that the US drillers ‘have indicated they will continue to keep their spending under control. The economics also don’t favour a surge in drilling, with half of the industry still uneconomical’.
In China, new Covid-19 infections have been increasing, with more than 28 million people under lockdown as the country is trying to control the resurgence of the coronavirus.