By Adedapo Adesanya
The oil market was down on Friday over concerns that demand in the world’s top oil importer, China, could falter amid rising COVID-19 cases and expanding lockdowns.
Due to these fears, the price of the Brent crude futures dropped 69 cents or 1.23 per cent to $55.40 per barrel, while the West Texas Intermediate (WTI) crude futures fell by 86 cents or 1.62 per cent to $52.29 per barrel.
The expanding lockdowns in China caused by rising coronavirus infections could be attributed to the fall witnessed yesterday at the market.
Chinese authorities have already imposed mobility restrictions in affected cities and have called on citizens to refrain from any travel during the upcoming Lunar New Year holidays.
Further worries in the United Kingdom also contributed to Friday’s loss as Prime Minister Boris Johnson said it was too early to say how the situation in the UK would turn out and suggested that some lockdowns and restrictions could remain in place until May.
This threatened a week of gains that had been boosted as the market expected the new US Administration sworn in on Wednesday to act big in the next COVID relief package.
The US Dollar dropped after Treasury Secretary nominee Janet Yellen told the Senate Finance Committee on Tuesday that the country should “act big” in the upcoming stimulus package. The weaker dollar made crude cheaper for holders of other currencies.
Also, oil prices also slipped based on a larger than expected crude inventories in the United States. The Energy Information Administration (EIA) reported a crude oil inventory build of 4.4 million barrels for the week to January 15 compared with an inventory decline of 3.2 million barrels estimated by the EIA for the previous week.
Meanwhile, oil stakeholders continue to observe the impact that the Biden administration will have on the oil market. While analysts agreed that the administration’s focus on pushing through additional stimulus measures and containing the pandemic will do well for oil demand in the near-term, they have remained sceptical over the administration’s green legislative agenda.
News that Iran was ramping up its oil production in anticipation of the US lifting sanctions also pressured prices of the benchmarks.
