Oil drops again due to new COVID-19 strain

Published:

On: Dec 2020

Recently, oil prices declined, expanding huge losses overnight, because of the rapid spread of a new COVID-19 strain in the United Kingdom that urged several countries across the globe to halt their borders to British passengers. The United States West Texas Intermediate (WTI) crude futures declined to 30 cents, or 0.6 percent, while, on the other hand, Brent crude futures declined to 26 cents or 0.5 percent.

Both benchmark decreases to three percent on Monday, partially vanishing current powerful increments on the support of the rollout of coronavirus vaccines, which has been observed as vital to easing mobility limitations. After the government of United Kingdom, warned that a new variant of COVID-19 strain seemed to be spreading faster than previous phase. Countries such as India, Russia, Hong Kong, Jordan and Pakistan joined European nations in cancelling travel from Saudi Arabia, Britain, Oman and Kuwait closed to their borders.

The chief market strategist of Axi, Stephen Innes said that the biggest nightmare before the Christmas season has settle in with a merge of a nee COVID-19 strain that associated by Brexit angst. He made this statement while indicating doubts over whether the prime minister of UK Boris Johnson can protect a post-Brexit trade agreement with the European Union. 

Mr. Innes said that the oil industry had been overbought, along with large positions surpassing short positions by nearly 4 to 1, so the selloff was assured. With the American dollar increasing as a secure-haven currency, the United States dollar rated oil is not much attractive for acquirers holding other currencies, which included to huge pressure on oil prices. The downside risks are larger than the upside until everyone completely understand how political leaders are going to react in next year, whether they are going to lock things in plunge again.