Oil drops more than 2% as demand fears hit sentiment
Oil prices fell more than 2% 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.
Brent crude fell $1.32, or 2.34%, to settle at $55.10 per barrel, after gaining 0.6% on Thursday. U.S. West Texas Intermediate crude settled $1.21, or 2.26%, lower at $52.36 per barrel, having risen more than 1% the previous session.
Both benchmarks, which hit their highest in nearly a year earlier in the week, were are heading for 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.
These positives were called into question on Friday as the dollar rose and China ramped up lockdown measures.
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. Still, some analysts said the move may not be enough to stoke demand.
Oil optimism could be derailed by coronavirus risks, Dan Yergin says
Oil producer group OPEC left its 2021 forecast for crude demand growth unchanged on expectations of an economic recovery. But that could change, warns energy expert Dan Yergin.
Energy expert Dan Yergin, however, cautioned that oil demand would depend on how the virus situation develops.
“If the coronavirus turns out to be the surge continues … if the vaccines were not as effective as thought, then you’d be back in weaker demand, and that would show up in price. But clearly there is optimism in the oil price,” he told CNBC’s “Squawk Box Asia” on Friday.
Reference: CNBC
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