Oil prices down over rising COVID-19 cases, lockdowns

Brent is still under pressure of protracted lockdowns due to second wave of coronavirus

Oil prices down over rising COVID-19 cases, lockdowns

Oil prices declined on Monday over prolonged lockdowns and restrictions amid increasing COVID-19 cases worldwide, intensifying concerns over weak fuel demand.

International benchmark Brent crude was trading at $55.25 per barrel at 0706 GMT for a 0.29% fall after closing Friday at $55.41 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $52.32 per barrel at the same time for a 0.99% increase after it ended the previous session at $52.27 a barrel.

While more than 99.2 million cases have been reported worldwide, the markets are closely monitoring the resurgence in COVID-19 cases globally, but especially in China, the world's second-largest oil consumer. 

The country's National Health Commission reported 124 new cases of confirmed infections, up from 80 a day earlier with a tally of 15 serious cases reported on Sunday. This increase added to oil demand fears as the country tightened lockdowns and imposed restrictions to battle the spread of the virus.

Meanwhile, some European countries like the UK, France and Spain are also preparing to take additional measures, by prolonging and tightening lockdowns to combat the resurgence in cases. Spain reported 42,885 more coronavirus infections on Friday, the second-highest daily surge since the pandemic began.

Political Risk and Oil Analyst Jose Chalhoub told Anadolu Agency that after ending last week at lower levels, the prices of main oil benchmarks, Brent and WTI, are still under pressure from protracted lockdowns due to the second coronavirus wave.

"We might see a slight pickup of prices marked by recently erupted diverse geopolitical risks, such as the recent shutdown of ports in Libya over a protest by security forces which potentially shut down two-thirds of Sirte Basin, reigniting fears of instability in the country after reaching a peace deal," he said.

Libya's Petroleum Facilities Guard on Sunday ordered a suspension of oil exports at the Al-Hariga port in the eastern city of Tobruk over a pay dispute. The private Al-Ahrar TV tweeted that the paramilitary force, which is affiliated with warlord Khalifa Haftar, halted oil exports from the port in protest of unpaid monthly salaries.

"Also rising tensions in the oil-rich region of the South China Sea between Beijing and the US, recent skirmishes in the border between Venezuela and Guyana over Guyanese oil exploration in a contested area of the Esequiba, and the recent announcement of Iraq to start cutting oil production to compensate its breaches of the OPEC+ deal, are all adding to a fear factor over oil markets while the lack of demand is still on the table," Chalhoub explained.

Another issue worth noting is Iran, according to Chalhoub. "The country recently stated it is ready to lift its oil production even if it does not reach a renewal of talks with the Biden administration under the Joint Comprehensive Plan of Action (JCPOA)."

With the new Biden administration taking office last week, the markets will now closely monitor developments over a possible return to the 2015 nuclear agreement, also known as the JCPOA, signed by the US and European countries with Iran.

Chalhoub also said that "it remains a mystery as to how Venezuela will raise its oil production, and if so, how significant any extra output will be for oil prices in the coming weeks and months."

The Venezuelan government recently announced its intention to welcome foreign investment in the country’s oil sector as part of President Nicolas Maduro’s goal of increasing oil production to 1.5 million barrels per day.