Oil prices drop amid new coronavirus concerns as cases in China rise

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SINGAPORE (Reuters) – Oil prices fell on Monday amid renewed concerns over global demand for fuel amid a tight coronavirus lockdown in Europe and further restrictions on movement in China, the world’s second largest user of oil , after an increase in cases in this country.

FILE PHOTO: Crude oil storage tanks are seen in an aerial photo of the Cushing Oil Hub in Cushing, Oklahoma, US April 21, 2020. REUTERS / Drone Base

Brent crude oil futures fell 42 cents, or 0.8%, to $ 55.57 a barrel at 0146 GMT after climbing to $ 56.39, its highest since February 25, 2020. The Brent has risen in the previous four sessions.

The US West Texas Intermediate (WTI) slipped 22 cents, or 0.4%, to $ 52.02 a barrel. WTI hit its highest level in nearly a year on Friday.

“Covid hot spots have exploded again in Asia, with 11 million people (in) lockdowns in China’s Hebei province … with a touch of political uncertainty the FED sparked profit taking through the doors this morning, ”Stephen Innes, head of global market strategist at Axi, said in a note 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, the capital of Hebei and the epicenter of the new outbreak in the province, is on lockdown with people and vehicles banned from leaving the city as authorities act to curb the spread of the disease.

Most of Europe is now subject to the strictest restrictions, according to the Oxford Austerity Index, which assesses indicators such as travel bans and the closure of schools and workplaces.

Still, the oil price losses have been held back by plans by US President-elect Joe Biden to announce trillions 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 to a voluntary reduction in oil production of 1 million barrels per day (bpd) in February and March as part of an agreement in under which most of the OPEC + producers will keep production stable during the new lockdowns.

“Oil still rates great optimism related to the deployment of Covid-19 vaccines,” Innes said.

“Demand will always improve as vaccines are rolled out, and supply is under control thanks to the continued efforts of OPEC + and Saudi Arabia.”

Reportage by Jessica Jaganathan; Montage by Christian Schmollinger

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