Oil prices fall amid worries over new coronavirus strain

[TOKYO] Oil prices slid in early trade on Monday as a fast-spreading new coronavirus strain in the United Kingdom raised concerns that tighter restrictions there and in other European countries could stall a recovery in the global economy and its need for fuel.

Brent crude dropped 97 cents, or 1.9 per cent, to US$51.29 a barrel by 0103 GMT after rising 1.5 per cent and touching its highest since March last Friday.

US West Texas Intermediate (WTI) crude was down 83 cents, or 1.7 per cent, to US$48.27 a barrel after also climbing 1.5 per cent on Friday to its highest level since February.

Monday's declines came after oil prices marked seven straight weeks of gains last week as investors focused on the rollout of Covid-19 vaccines.

"A new variant of the coronavirus in Britain and tighter travel restrictions in Europe sparked fears over slower economic recovery, prompting investors to unwind long positions," said Kazuhiko Saito, chief analyst at commodities broker Fujitomi.

"The oil market has been on a bull trend in the past month or so, ignoring negative factors, amid an optimism that a widening vaccine rollout would revive global growth, but investors' rosy expectations for 2021 have suddenly vanished," Mr Saito said.

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British Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel, in particular the flow of freight in and out of Britain as Covid-19 cases surged by a record number for one day. The headache comes as Mr Johnson also seeks to hammer out a final accord on Brexit.

The variant, which officials say is up to 70 per cent more transmissible than the original, also prompted concerns about a wider spread, forcing several European countries to begin closing their doors to travellers from the United Kingdom.

The negative sentiment also overshadowed a weekend deal among US congressional leaders for a US$900 billion coronavirus aid package.

Adding to pressure, the oil and gas rig count, an early indicator of future output, rose by eight to 346 in the week to Dec 18, the highest since May, Baker Hughes said on Friday, as producers keep returning to the wellpad with crude prices trading above US$45 a barrel since late November.

REUTERS