Oil prices plummeted Tuesday as the U.S.’s new economic recovery package was approved and hopes for an increase in new coronavirus cases raised questions about the pace of recovery in demand.
Brent crude was down 28 cents, or 0.5%, at $55.60 by 0431 GMT, while WTI crude fell 25 cents, or 0.5%, to $52.52.
Both benchmarks rose nearly 1% on Monday.
Oil, which recently hit 11-month highs, has been caught in persistent doubts about a recovery in demand as the outbreak continues to escalate. However, the optimism that the newly formed Biden administration in the United States will provide more incentives to support economic growth has struck a balance.
The Biden administration is still trying to convince Republican lawmakers of the need for further incentives, and there are questions about when this will be approved.
Even as the rate of new infections in the United States declines, European countries continue to impose strict restrictions to combat the spread of the virus. Increasing Covid-19 cases in China, the world’s largest energy consumer, overshadow demand expectations.
Still, there are areas where the demand for oil remains strong.
In India, crude oil imports rose to their highest level in more than two years in December, as the easing of coronavirus restrictions boosted economic activity.
On the supply side, the Organization of Petroleum Exporting Countries and its allies said compliance with pledged oil production restrictions an average of 85% in January.
There is a risk of oversupply if sanctions on Iranian crude oil are lifted or if US drillers increase output.