Oil prices dropped early on Friday, as expanding lockdowns in China weighed on market sentiment about immediate global oil demand, while a stronger U.S. dollar also dragged crude futures down.
As of 9:47 a.m. ET on Friday, WTI Crude prices were down by 1.34 percent at $52.89 and Brent Crude was trading down 1.49 percent at $55.58.
Brent prices were headed for their first weekly loss in three weeks, while the U.S. benchmark was poised for a tiny weekly gain early on Friday. According to Bloomberg estimates, WTI Crude was set for a weekly gain in ten of the past eleven weeks.
Following a rally of several days after Saudi Arabia surprised the market last week with an additional 1 million barrels per day (bpd) cut for February and March, oil prices retreated on Thursday and Friday from their highest levels since February 2020.
Expanding lockdowns in China, where as of Friday, there were 22 million people on lockdown, weighed on the market. China is grappling with its worst resurgence of the coronavirus since the summer of 2020.
Oil prices were also subdued due to the strengthening of the U.S. dollar on Friday, as a stronger U.S. currency makes crude buying more expensive for holders of other currencies.
In addition, analysts see near-term transportation fuel demand in Europe as weak in the next two to three months due to the lockdowns across the continent. Despite the start of vaccinations in Europe, many countries continue to battle record daily new coronavirus cases and have been on lockdown, again, since before Christmas.
In its January Monthly Oil Market Report (MOMR), OPEC said on Thursday that restrictions and lockdowns negatively affected Europe's demand for transport fuels at the end of 2020 and would continue to weigh on consumption in the first quarter of 2021, with "a significant negative impact."
Early on Friday, expectations of weak oil demand in the first quarter and the stronger dollar outweighed the excitement from the Saudi production cut and the $1.9-trillion stimulus package that U.S. President-elect Joe Biden unveiled on Thursday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More