Oil prices slid in early trade on Monday as a fast-spreading new coronavirus strain in the United Kingdom raised concerns that tighter restrictions there and in other European countries could stall a recovery in the global economy and its need for fuel.
Brent crude dropped 97 cents, or 1.9%, to $51.29 a barrel by 0103 GMT after rising 1.5% and touching its highest since March last Friday.
Monday’s declines came after oil prices marked seven straight weeks of gains last week as investors focused on the rollout of COVID-19 vaccines.
“A new variant of the coronavirus in Britain and tighter travel restrictions in Europe sparked fears over slower economic recovery, prompting investors to unwind long positions,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.
“The oil market has been on a bull trend in the past month or so, ignoring negative factors, amid an optimism that a widening vaccine rollout would revive global growth, but investors’ rosy expectations for 2021 have suddenly vanished,” Saito said.
British Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel, in particular the flow of freight in and out of Britain as COVID-19 cases surged by a record number for one day. The headache comes as Johnson also seeks to hammer out a final accord on Brexit.
The variant, which officials say is up to 70% more transmissible than the original, also prompted concerns about a wider spread, forcing several European countries to begin closing their doors to travellers from the United Kingdom.
The negative sentiment also overshadowed a weekend deal among U.S. congressional leaders for a $900 billion coronavirus aid package.
Adding to pressure, the oil and gas rig count, an early indicator of future output, rose by eight to 346 in the week to Dec. 18, the highest since May, Baker Hughes said on Friday, as producers keep returning to the wellpad with crude prices trading above $45 a barrel since late November.