Oil prices drop due to rise in Covid-19 infection

Darnell Taylor
January 20, 2021

Oil prices fell on Monday, to deepen losses for the second straight day and pulled back further from an 11-month high on profit-taking and renewed concerns about the global demand due to the rising Covid-19 infections in most parts of the world.

Last week, US drillers commissioned more oil and gas rigs for an eighth consecutive week, encouraged by recent price strength that made production more profitable, even as the number of rigs operation is still less than half of the level of a year ago.

Citing statistics, in the day's commodity market wind down, United Kingdom crude futures' prices jolted 2.3 per cent to $55.10 a barrel, while US West Texas Intermediate crude oil futures faltered 2.3 per cent to settle down at $52.36 a barrel.

US drillers added additional strain by placing extra oil and pure gasoline rigs to work for an eighth consecutive week final week as a result of rising costs have made manufacturing extra worthwhile.

USA crude lost around 3% on Friday, its second loss in 3 days, and the largest daily loss in 2021 due to profit-taking from 11-month high of $53.90, and Brent crude futures fell 2.9% on profit-taking from the highest since February 2020 of $57.40.

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"Corona-induced economic fears, a stronger United States dollar and more pessimistic investor sentiment are all playing their part in the fact that Brent is trading. around US$3 lower than last Wednesday", said Commerzbank analyst Eugen Weinberg.

Investors are watching out for U.S. President-elect Biden's inauguration speech on Wednesday for details on the country's $1.9 trillion aid package.

"Oil prices struggled from the mid-week after swelling production inventories then fused with the return of COVID in China, providing a not-so-rosy near-term demand signal".

"In Europe and the USA, the slow rollout of vaccines is also raising concerns that a rebound in demand will remain elusive", the bank said.

Security concerns ahead of this week's USA presidential inauguration are also weighing on investor sentiment, said Tamas Varga, analyst at PVM Oil.

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