Oil prices tumbled more than 2.5 percent early on Friday, dragged down by concerns that oil demand in the world’s top oil importer, China, could falter amid rising COVID-19 cases and expanding lockdowns.
As of 9:35 a.m. ET on Friday, WTI Crude prices had slipped below $52 a barrel, and were trading down 2.60 percent at $51.73. The international benchmark, Brent Crude, had fallen below $55, with the price down 2.28 percent at $54.79.
Oil prices lost further ground on Friday from the 11-month high they had hit last week, when the Saudi surprise cut was still supporting gains.
This week, the price of oil rose on Tuesday and Wednesday, as the market expected the new U.S. Administration to “act big” in the next COVID relief package. The U.S. dollar dropped after Treasury Secretary nominee Janet Yellen told the Senate Finance Committee on Tuesday that the U.S. should “act big” in the upcoming stimulus package. The weaker dollar made crude cheaper for holders of other currencies, while the overall bullish market sentiment also sent investors and speculators to riskier assets, such as shares and commodities.
However, oil prices slipped on Thursday, after the American Petroleum Institute (API) reported a build in crude oil inventories of 2.562 million barrels for the week ending January 15. Official EIA inventory data is expected later on Friday.
Before the EIA inventory report on Friday, oil prices were pressured by a stronger U.S. dollar, which makes buying crude more expensive for holders of other currencies.
The expanding lockdowns in China as COVID infections rise turned the sentiment bearish for the near term, as the market fears global oil demand this quarter could be weaker than anticipated just a week ago. Authorities in China are discouraging travel during the upcoming Lunar New Year holiday, while UK Prime Minister Boris Johnson said on Thursday it was too early to say how the situation in the UK would evolve, and suggested that some lockdowns and restrictions could remain in place until the summer.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Was Saudi Arabia's Surprise Production Cut A Good Idea?
- Goldman Bullish On Oil As It Eyes Major Relief Package
- Can Shale Resist The Lure Of Another Output Surge?