Oil prices dropped on Friday as rising coronavirus cases in China renewed concerns over lockdowns in the world’s biggest crude importer.
It comes after strong import data from China and fresh US stimulus news from the incoming Biden administration boosted oil on Thursday.
Brent (BZ=F) was down 1.51% or 85 cents at around 9am in London, sitting at $55.57 (£40.71) a barrel.
Crude prices (CL=F) also dropped, down 1.31% to $52.88 a barrel.
More than 28 million people are under lockdown in the country. On Friday it reported the highest number of new COVID-19 cases in more than 10 months, according to Reuters.
Data on Thursday showed that crude imports into China were up 7.3% in 2020, with record arrivals in two out of four quarters as refineries increased runs and low prices prompted stockpiling.
“Seeing COVID-19 infections rise in China by the largest margins in a long time is alarming for the market and, combined with strict ongoing lockdowns in Europe, may affect oil demand much more than initially anticipated in the first quarter of 2021,” head of oil markets at Rystad Energy, Bjornar Tonhaugen said.
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Last week, Saudi Arabia surprised the world when it announced plans to cut its current production rate by another 1 million barrels per day (BPD) on top of the amount it agreed to cut under the OPEC+ agreement.
The kingdom also hiked crude prices for buyers in Asia and the US.
Saudi Arabia and Russia are respectively the second and third-biggest oil producers in the world after the United States.
Oil production in Russia declined in 2020 for the first time since 2008, reaching its lowest level since 2011 following a global deal to cut output and sluggish demand caused by COVID-19. Russian oil and gas condensate output declined to 10.27 million bpd last year.
The coronavirus pandemic saw oil consumption plummet in 2020.
Oil demand in China collapsed by 20% in February after the country and the world’s biggest importer locked down for the coronavirus pandemic.
In March, a price war between Saudi Arabia and Russia, over how to respond to the demand drop, sent shockwaves across the oil markets and added to black gold’s struggles.
As a result, in April for the first time in history US futures traded below zero, as the world was so awash in crude. On 20 April 20, West Texas Intermediate (WTI) crude collapsed to minus $40.32 per barrel. This meant that producers paid buyers to take the oil off their hands.
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