Oil Prices Drop Due To Covid Outbreak In China
Oil prices resumed their decline in trading due to the news from China where a noticeable increase in the number of cases of Covid is recorded. As of January 22, futures for Brent in London are depreciating by 1.46% to USD 55.28 per barrel. New York WTI contracts are at USD 52.25 a barrel.
According to the American Petroleum Institute, commercial tank stocks unexpectedly increased 2.6 million barrels, although the market was expecting a 1.2 million decline. The oil surplus has returned to the U.S., but the biggest reason for traders' fears about demand is the Covid-19 cases in China. Chinese authorities imposed a partial lockdown in Beijing and 1.6 million residents are not allowed to leave the capital without a special permit. Earlier in January, a quarantine was introduced in Shijiazhuang with a population of 11 million people. This undermines optimistic forecasts for oil demand in China that was actively purchased raw materials in 2020.
Joe Biden presented a national strategy to combat COVID-19, but at the same time warned that another 100,000 Americans could die from the coronavirus in the coming month and that the situation will worsen even more before improvement begins. He also said it will take several months before most Americans are vaccinated. This means that the potential for increasing demand for fuel in the first quarter remains low.