Oil prices fall as major economies reimpose lockdowns

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Brent, the global benchmark, fell 5% early in the morning in Asia, hitting levels last seen in May, before cutting losses on trade. 2% less at $ 37.13 per barrel. West Texas Intermediate, the US benchmark, lost 2.49% to $ 34.90 a barrel.

Decisions by European governments to impose another round of tough coronavirus restrictions are weighing on sentiment. France, Germany and Belgium are resuming nationwide closures, closing restaurants and non-essential businesses for several weeks and restricting travel. In the UK, authorities are introducing a lockdown in England which is expected to last until December 2.

These four countries consume the equivalent of just over 6% of global consumption, “so it’s no surprise that we are seeing the market react this morning,” wrote ING’s head of commodities strategy. Warren Patterson and senior commodities strategist Wenyu Yao in a research note on Monday.

Economists fear that the European economy will contract in the fourth quarter, raising fears of another recession. Despite record third quarter GDP growth, the EU economy remains around 4% smaller than it was at the end of September last year.
There are also concerns that governments elsewhere may be forced to reimpose restrictions as the holiday season approaches. The United States recorded 81,493 new cases of coronavirus on Sunday, after reporting 99,321 on Friday, the highest single-day case count of any country, according to Johns Hopkins University. The U.S. death toll from Covid-19 now stands at over 230,995, the highest death toll in the world.

“New concerns that politicians around the world will be forced to lock down Christmas this year are hitting oil markets like a ton of bricks,” Stephen Innes, chief global markets strategist at Axi said in a research note. “The alarming level of anxiety in the markets allows the oil roller coaster to easily cross rally peaks and descend at an alarming rate,” he added.

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