Oil prices suffered their biggest weekly fall since October as signs of flagging demand in key markets abruptly halted a vigorous rally. International benchmark Brent crude ended the week down almost 7 per cent, settling at $64-53 a barrel. West Texas Intermediate, the US marker, fell by a similar margin to $61.42 a barrel.
The slide put the brakes on an almost unbroken rally this year. Brent and WVTI have soared more than 60 per cent since early November as the world has begun to reopen from pandemic-induced lockdowns. But analysts said the rally had moved ahead of itself after Brent pierced the $70-abarrel mark last week, with traders refocusing on renewed lockdown measures in parts of Europe and signs that physical demand in China and the US remained fragile.
“I think the market is catching up with itself in terms of the actual physical demand for crude in China and the United States,” said Christopher Page, senior oil market analyst at Rystad Energy.
In Beijing, authorities were reported to be cracking down on imports of heavy emissions fuels, triggering concerns over the future of some Asian imports. US oil inventories, meanwhile, have increased as petrochemical plants take longer than expected to come back online after the Texas freeze. The Energy Information Administration on Wednesday reported a 2.4m-barrel increase in stocks.
“The market has felt a bit overextended for a while, with the macro story and general vaccine optimism helping to prop things up,” said Paul Horsnell, head of commodities research at Standard Chartered. “Long time since we’ve had a serious test of the downside, so it just needed a few things to get the ball rolling as catalysts.”