Oil prices drop below $65 a barrel on resurging COVID-19

Crude oil prices drifted lower at the first trading session of the week in London. Oil traders are arbitrarily going short, on signs of more COVID-19 lockdowns in Europe.

At the time of drafting this report, Brent crude futures were down 0.57% to trade at $64.16 a barrel, West Texas Intermediate futures lost about 0.54% to trade at $61.11 a barrel after rolling over to the May 21 contract.

  • Both major oil benchmarks have lost more than 6% during the previous week but remained above the $60 mark.
  • Germany, Europe’s biggest economy, is the latest economic juggernaut to consider extending restrictive measures, with a draft proposal that is aimed at extending the present lockdown period into a fifth month as the number of new COVID-19 caseloads tick up.

Stephen Innes, Chief Global Market Strategist , elaborated more on other macros weighing on oil prices.

“The oil market is searching for answers, with analysts linking the oil price collapse to slow European recovery due to lockdowns and slow vaccine rollouts.

“This is neither a new nor compelling argument, but lower Asian pricing for Middle East crude and higher Chinese imports for Iranian supply are prime culprits, as is the general cross-asset risk-off tone, which isn’t helping matters.”

Bottom Line: Oil traders are currently undergoing a reality check on the account that oil energy demand still has a long way from a full demand recovery, and it’s the record levels of withdrawn production capacity that’s the main prop for the oil market. So, having crested $70/ barrel on sentiments alone, prices were always vulnerable to a pull-back.

Adopted from Nairametrics