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Oil Futures Tumble Over Fresh Lockdowns, US-China Spat

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By Adedapo Adesanya

Oil prices reversed by 1 per cent on Monday on the back of surging coronavirus cases and heightened tensions between the United States and China.

During the session, the price of the Brent crude reduced by 1.24 per cent or 62 cents to sell at $48.63 per barrel while the West Texas Intermediate (WTI) crude tumbled by 1.38 per cent or 64 cents to trade at $45.60 per barrel.

A surge in coronavirus cases in some key economies has forced a series of renewed lockdowns, including strict new measures in the US state of California, Germany and South Korea.

Most parts of California are under a new strict lockdown as the virus continues to surge across the country.

The stay-at-home order affects around 85 per cent of the state’s 40 million people. It will be in place for at least three weeks and cover the Christmas holiday.

The country has seen a sharp rise in cases and COVID-19-related deaths in recent weeks, a surge that could be partly due to last month’s Thanksgiving holiday where millions of Americans travelled around the US.

Also in Germany, its Bavaria region announced tougher coronavirus rules, including local curfews and partial closure of schools on Sunday as case numbers remained high across the country despite five weeks of national restrictions while in South Korea, the Asian country raised its COVID-19 alert as there are concerns about rising numbers in hospitals.

These, coupled with a fresh spat between the US and China, also contributed to the bearish mood at the market on Monday.

Fresh reports indicated that the US was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.

In recent months, the US-China relations have been out of the headlines, allowing investors to focus on other factors like the US presidential election and coronavirus.

If the American government imposes additional sanctions on Chinese officials before Mr Joe Biden, the president-elect, takes office, his options on stabilizing relations with the world’s second economy will be even more limited.

Analysts noted that the negative impact from new sanctions may be limited as vaccine optimism continues to support markets.

Last Wednesday, the UK became the first country in the world to approve the Pfizer/BioNtech COVID-19 vaccine and will be available from this week.

Other optimism included OPEC+, comprising of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreeing to increase output slightly from January but continue the bulk of existing supply curbs.

Business Post had reported last week that the 23 country alliance agreed to taper the cuts by 500,000 barrels per day in January and then decide the future trajectory on a monthly basis.

Countries that overproduced in previous months were given until the end of March to make compensatory cuts, which equates to an extension of three months.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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