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.
READ: Covid-19: UK Govt warns of new strain that spreads faster and may have already left the UK
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.
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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.
READ: European countries ban flights from UK as new Covid-19 strain spreads
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.