Crude oil prices slumped significantly in the first trading session of the week.
The drop is largely attributed to the discovery of a new COVID-19 strain in the major emerged markets, particularly the United Kingdom which oil traders fear could pause a nascent recovery in energy demand.
At the time of writing this report, Brent crude dropped about 3.20% to trade at $50.59 and WTI futures sank by 3.09% to $47.72.
The COVID-19 variant, which is reportedly much more transmissible than the original strain of COVID-19 virus, leading to a wider spread amid the rollout of COVID-19 vaccines, countries like Canada, Germany, Italy, Argentina, France, the Netherlands, Ireland, and Chile have banned travelers from going to the United Kingdom with some also banning freight from the United Kingdom.
What this means: “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 … 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,” Fujitomi Co. chief analyst, Kazuhiko Saito told Reuters.
What to expect; Oil traders anticipate a small washout at today’s trading session as all those bullish synergies around reflation and a weaker US dollar are reversing a touch with the latest chaos in the UK on the back of the mutant strain of the virus.