Brent crude oil prices fell as much as $1 per barrel on Monday, hit by renewed concerns about global fuel demand amid tough coronavirus lockdowns around the world, as well as a stronger U.S. dollar.
Brent was down 57 cents, or 1%, at $55.42 a barrel at 1205 GMT, after falling $1 to a session low of $54.99 earlier.
U.S. West Texas Intermediate (WTI) slipped 26 cents, or 0.5%, to $51.98 a barrel.
“The renewed concerns about demand due to very high numbers of new corona cases and further mobility restrictions, plus the stronger U.S. dollar, are generating selling pressure,” Commerzbank analyst Eugen Weinberg said.
Worldwide coronavirus cases surpassed 90 million, according to a Reuters tally.
Despite strict national lockdowns, Britain is facing the worst weeks of the pandemic, and in Germany cases are still rising.
“The recovery in oil demand is stalling in Europe in particular due to the prolonged lockdowns. Concerns over Chinese demand are also growing due to the spike in Covid-19 cases in the country, as traders fear new lockdowns,” said Rystad Energy’s analyst Bjornar Tonhaugen.
Mainland China saw its biggest daily increase in virus infections in more than five months, authorities said, as new infections rose in Hebei, which surrounds the capital, Beijing.
Shijiazhuang, the provincial capital and epicentre of the new outbreak, is in lockdown, with people and vehicles barred from leaving, as authorities seek to rein in the spread.
A stronger dollar, supported by hopes for more stimulus to boost the world’s largest economy, also weighed on oil prices.
Oil is usually priced in dollars, so a stronger dollar makes crude more expensive for buyers with other currencies.
Brent and WTI rose almost 8% last week, supported by Saudi Arabia’s pledge for a voluntary oil output cut of 1 million barrels per day (bpd) in February and March as part of a deal for most OPEC+ producers to hold production steady.
The Saudi cut is expected to bring the oil market into deficit for most of 2021 even though lockdowns are hitting demand, analysts said.
Tougher containment measures to curb the virus introduced by European countries were concerning for fuel demand, JBC Energy Research said on Monday, but added: “Our projections suggest that this latest Saudi production cut should be enough to keep crude fundamentals broadly solid.”