Oil prices plummeted more than 2% early on Monday as a new strain of coronavirus which is spreading fast in the United Kingdom (UK), prompted tighter restrictions in Britain and many European countries banning fights from the UK. Brent crude was down $1.85, or 3.5%, at $50.41 a barrel West Texas Intermediate (WTI) Crude for delivery in January fell $1.36, or 2.77%, to settle at $47.74 per barrel. The steep correction on the oil market, as well as on all European equity markets, followed the news out of the UK that a new mutated strain of the coronavirus is spreading faster in London and southeast England.
Brent climbed above $50 last week for the first time since March, buoyed by optimism stemming from COVID-19 vaccines.
But a new COVID-19 strain, said to be up to 70% more transmissible than the original, has renewed fears about the virus, which has killed about 1.7 million people worldwide.
More countries closed their borders to Britain on Monday, causing travel chaos and raising the prospect of UK food shortages.
The UK introduced on Saturday a new highest-alert lockdown level, Tier 4, for London and areas in southeast England, in which people must not leave or be outside of their home or garden except where they have a ‘reasonable excuse’ such as going to work that cannot be done from home, medical reasons, or fulfilling legal obligations. Basically, more than 15 million people in England are again under the same restriction levels as the nationwide lockdown in November.
France closed on Sunday evening all its borders with the UK for 48 hours, while many European countries banned flights from the UK, sparking renewed fears that travel bans and low fuel demand would further delay the long-awaited oil demand recovery.
Head of the FX Strategy at Saxo Bank John Hardy, said on Monday “These developments being another sign that the market may have to go through a prolonged period before the vaccine rollout eventually supports a recovery in fuel demand and the price of oil.”
