Oil prices dropped from nine-month highs on Friday, with escalating coronavirus infections viewed as a threat to near-term fuel demand and a stronger U.S. dollar also having a depressing effect on oil prices.
Brent crude futures dipped by 20 cents or 0.39% to $51.30 per barrel at 08:57 West Africa Time, while U.S. West Texas Intermediate (WTI) was down by 14 cents or 0.29% to $48.22.
Over 73.65 million are officially said to be infected by the coronavirus around the world and 1,654,920 have died, going by a Reuters tally on Friday.
The upsurge in cases is causing tough restrictions on travel, impacting fuel demand and any economic rebound while supressing oil prices.
There was a greater proof the world’s biggest economic recovery from the pandemic recession was falling as statistics indicated that the number of Americans filing first-time claims for unemployment benefits suddenly increased last week.
Both Brent and WTI rose on Thursday, on hopes surrounding progress on a COVID-19 stimulus package, strong Asian refining demand and a dive in the dollar to a two-and-a-half year low.
With oil prices denominated in dollars, a rise in the U.S. currency on Friday made oil costlier for buyers holding other currencies.
The prospects of (a) stimulus deal and vaccine rollout have largely been digested by market participants and thus been more or less priced in, rendering (the) oil prices vulnerable to a pullback when profit taking kicks in,” said Margaret Yang, strategist at DailyFX.
ANZ Research stated that with coronavirus cases touching fresh daily records, and curbs tightening in Japan, pressure is mounting on the Organisation of the Petroleum Exporting Countries (OPEC), Russia and allies, a grouping called OPEC+.
OPEC+ intends to add half a million barrels per day (bpd) of supply in January, a step towards a 2million bpd target.
“While OPEC+ has shown it’s ready and willing to adapt to evolving market conditions, which should protect crudes value in the longer term, near-term challenges may still weigh on recent bullish momentum,” said OANDA analyst Craig Erlam in a note.
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