Oil prices dropped early on Monday as a stronger U.S. dollar and many countries still battling rising daily COVID-19 cases weighed on market sentiment at the start of the week.
As of 9:14 a.m. ET on Monday, WTI Crude prices were down by 0.15 percent at $52.30 and Brent Crude was trading down 0.29 percent at $54.97, with prices down by around $2 a barrel from the middle of last week.
The lockdowns in Europe and the fairly slow start to vaccination programs in many countries outweighed early on Monday good economic data out of China, which beat analyst estimates to post 6.5-percent annual growth in its economy in the fourth quarter, compared to 6.1-percent growth expected by economists in a Reuters poll. China is also the only major economy to have posted economic growth last year, of 2.3 percent. All other major economies in the world are expected to have contracted in 2020, hit by the pandemic.
Still, China's economic data wasn't enough to wipe out a cautious approach to the oil market at the start of this week, as participants are still concerned that the spreading of the virus and the lockdowns will significantly weigh on oil demand in the first quarter. At the same time, vaccination programs are likely to take months before allowing a critical mass of economically active people to contribute to global economic recovery.
"Hopes about a speedy recovery in fuel demand continues to be challenged by lockdowns and the continued rapid spreading of Covid-19," Saxo Bank said on Monday.
Moreover, the upcoming presidential inauguration in the United States on January 20 also makes investors more cautious, PVM Oil analyst Tamas Varga told Reuters.
Saxo Bank sees President-elect Joe Biden's inauguration as another factor to watch in oil this week, as well as how soon he could roll out the stimulus package announced last week.
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