Oil Prices Plunged as Countries Close Borders to British Travellers
Oil prices were down on Tuesday as concerns mount over a more contagious mutant COVID virus in the United Kingdom overshadowing the good news on the approval of the much-expected US stimulus package.
International benchmark Brent crude was trading at $49.81 per barrel at 0620 GMT with a 2.16% decrease after closing Monday at $50.91 a barrel.
American benchmark West Texas Intermediate (WTI) was at $46.84 per barrel at the same time for a 2.36% decrease after ending the previous session at $47.97 a barrel.
Oil prices declined on concerns of a protracted oil demand recovery due to the emergence of a new strain of COVID-19 in the UK.
Several countries, including India, Pakistan, Russia, Jordan and Hong Kong, as well as European countries, suspended travel from the UK, and even started to close their borders with the country to prevent the spread of the new virus said to be up to 70% more transmissible than the original.
Some other countries, like Saudi Arabia, Kuwait and Oman, completely closed their borders.
The mutant virus in the UK even overshadowed the positive US relief package developments for people and hard-hit businesses amid the economic slowdown caused by the pandemic.
The US Senate ended months of anticipation late Monday by overwhelmingly approving a $900 billion coronavirus stimulus bill and sending the measure to President Donald Trump to be signed into law.
The 92-6 vote also approves a wider $1.4 trillion spending bill that will fund the US government through September 2021.
Crude oil prices, which are indexed to the US dollar, also came under pressure with the rising value of the greenback.
“The nightmare before Christmas scenario has set in, with a combination of the ‘mutant virus’ compounded by Brexit angst,’’ said Stephen Innes, Chief Market Strategist at Axi, referring to doubts over whether UK Prime Minister Boris Johnson can secure a post-Brexit trade deal with the European Union.
Innes said the oil market had been overbought, with long positions outweighing short positions by around 4 to 1, so the selloff was inevitable.
Read Also: Brent Crude Price Drops 0.4 Percent on COVID-19 Concern
With the U.S. dollar rising as a safe-haven currency, U.S.-dollar priced oil is less attractive for buyers holding other currencies, which added to pressure on oil prices.
“The downside risks are greater than the upside until we better understand how politicians are going to react in 2021 – whether they’re going to lock things down again,’’ Innes said.
Oil Prices Plunged as Countries Close Borders to British Travellers.
