Oil Prices Plunge amidst Rising Cases of COVID-19 in China
Oil prices plunged on across market on Monday amidst reported rising cases of COVID-19 in China.
After reaching 11-month highs last week, crude prices retraced Monday as China reported the most rise in daily coronavirus cases in more than five months, reigniting lingering concerns over weak demand.
International benchmark Brent crude was trading at $55.19 per barrel at early today for a 1.42% fall after closing Friday at $55.99 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $51.73 per barrel at the same time for a 0.98% decrease after it ended the previous session at $52.24 a barrel.
Monday’s price slump was spurred mainly by demand concerns after more than 100 people tested positive in Hebei province in northern China, one of the world’s largest oil consumers.
As a result, government imposed partial lockdowns and travel restrictions in and around the province bordering the capital Beijing.
Further weighing on prices, the number of US oil rigs increased by eight to 275 last week compared to the previous week, signaling greater short-term output and raising supply glut concerns.
Oil prices started Friday with uptrend, boosted by Saudi Arabia’s voluntary oil production cut decision to end friction between OPEC+ countries on output cut rates.
International benchmark Brent crude was trading at $54.74 per barrel for a 0.66% rise after closing Wednesday at $54.38 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $51.16 per barrel at the same time for a 0.64% increase after it ended the previous session at $50.83 a barrel.
Prices fluctuated between $54-55 a barrel, resulting from the OPEC+ decision to cut production by more than expected in February and March.
This move relieved markets threatened by low oil demand amid the ongoing lockdowns and strict containment measures.
Meanwhile, global oil prices reached 11-month highs on Thursday, supported in the short term by the US clashes in the Capitol.
This mainly driven by the surprise production cut decision of the oil cartel.
In order to solve the differences between OPEC member countries, some of which were in favor of higher production levels.
Saudi Arabia, the de-facto OPEC leader and major driver of OPEC+ production cuts, said it would voluntarily reduce its production in February and March by 1 million barrels per day (bpd).
Russia and Kazakhstan will collectively increase their output by 75,000 bpd while the rest of the group will hold output steady.
OPEC+ is currently cutting its output by 7.2 million bpd in January.
After Saudi Arabia’s voluntary reduction, the group’s production cut will now be 8.125 million bpd in February and 8.05 million bpd in March.
This means OPEC+ will reduce its output in February by 925,000 bpd and 850,000 bpd in March relative to output rates in January.
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Oil Prices Plunge amidst Rising Cases of COVID-19 in China
