As a continuing surge in coronavirus cases globally prompted a number of renewed lockdowns, including stringent new initiatives in Southern California in the United States, the world’s top oil buyer, oil prices dropped from multi-month highs on Monday.
At $49.04 a barrel, Brent crude oil futures dropped 21 cents, or 0.4 per cent, while West Texas Intermediate oil futures dropped 25 cents, or 0.5pc, to $46.01 a barrel. Last week, both benchmarks benefited for a fifth consecutive week.
After Los Angeles county had another record high in coronavirus infections, crude pared earlier vaccine roll-out gains and South Korea increased their warning level,’ said Edward Moya, senior market analyst at OANDA.
The stringent policies and lockdowns of Covid-19 around the world appear primed to keep crude prices high in the short term.
In California, the regulations call for restaurants, hair and nail salons and tattoo stores to shutter again.
On Sunday, the southern German territory of Bavaria declared that it would enforce a stricter lockdown from Wednesday to 5 January, while the South Korean authorities expanded the guidelines for social distancing of the capital Seoul and the surrounding areas, which would continue until at least the end of the month.
Last week, US energy companies added oil and natural gas rigs for the eleventh time in 12 weeks, also weighing on markets, as producers head to the well pad, even as much of this year and next are reducing investment.
Iran, meanwhile has ordered its oil ministry to prepare facilities within three months for the production and selling of full-capacity crude oil, state media reported on Sunday.
The possible Iranian rise in supply within three months is contributing to the strain on oil prices. Iran is hopeful that if they return to the 2015 nuclear agreement, the US will relax restrictions,” added Moya.
Still, China’s rapid market recovery and Covid-19 vaccine advances have capped price losses.
After February 2018, China’s exports in November grew at their fastest rate, helped by high global demand and as the manufacturing rebound in the world’s second-largest economy outpaced those of its main trading partners.