Oil Tumbles on Renewed Lockdown in China
By Adedapo Adesanya
Oil prices tumbled more than 2 per cent on Friday as expanding lockdowns in the largest importing country, China, weighed on market sentiment about immediate global oil demand.
This deflated the price of the Brent crude by $1.52 or 2.69 per cent to $54.90 per barrel and weakened the West Texas Intermediate (WTI) crude by $1.52 or 2.65 per cent to $52.13 per barrel.
The situation in China has put 22 million people on lockdown, weighing on the oil market. China is grappling with its worst resurgence of the coronavirus since the summer of 2020.
According to analysts, the recent resurgence in coronavirus infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major economies has put a plan on expected recovery.
This also extends to Europe as there are projections of weakened demand in the next two to three months due to the lockdowns across the continent. Despite the start of vaccinations in Europe, many countries continue to battle record daily new coronavirus cases and have returned to lockdown since Christmas.
Oil prices were also down due to the strengthening of the US dollar on Friday, as a stronger American currency makes crude buying more expensive for holders of other currencies.
Expectations of weak oil demand in the first quarter and the stronger dollar outweighed the excitement from the Saudi production cut of one million barrels per day in February and March plus the $1.9 trillion stimulus package that US President-elect Joe Biden unveiled on Thursday.
Mr Biden who assumes office next week has pledged to boost the rate of vaccinations and helping counter the economic effects of the pandemic.
He has already set a goal of administering 100 million vaccine shots in the first 100 days after he takes office on January 20, and his plan is expected to include funding to expand the vaccination campaign. Also, his plan is also expected to include a new round of direct payments to US households.
The relief package may increase fuel demand, but worse than expected jobs data is likely to offset this demand.