Oil fell toward $47 a barrel — after posting a seventh weekly gain — on concern a mutation of Covid-19 discovered in the U.K. could speed transmission of the virus and lead to more lockdowns. Futures in New York dropped around 3% after closing at the highest in almost 10 months on Friday. More than 16 million Britons are now required to stay at home as a full lockdown came into force in London and the southeast of England, with some European countries limiting travel with the U.K. A stronger dollar also reduced the appeal of commodities like oil that are priced in the currency, while a stimulus deal in the U.S. couldn’t stem the slide.
Physical oil prices are also falling as Asian refiners ease purchases after an earlier-than-usual buying spree. Abu Dhabi’s Murban crude was sold last week on the spot market below its official selling price for the first time since August, while differentials for Russia’s ESPO have fallen from a six-month high.
Crude has rallied around 33% since the end of October on a series of vaccine breakthroughs that have created expectations for a recovery in energy demand next year. In the short term, however, prices are being buffeted by the fast-spreading virus leading to more stay-at-home orders.
“We have quite a bit of speculative money in oil at the moment, attracted by the more constructive outlook for 2021,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, if we start seeing the virus mutating, I imagine some of these speculators will become a bit more skittish.”
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