Oil prices plummeted on Monday as renewed COVID-19 lockdowns raised new concerns about global fuel demand.
Brent crude futures for March fell 8 cents, or 0.1%, to $55.38 a barrel by 0717 GMT, while West Texas Intermediate crude for March was at $52.26 a barrel, down 1 cent.
As COVID-19 cases increased, lockdowns in Hong Kong, China and possibly France have aggravated the market as signs of weak demand, while restricting business activities and fuel consumption.
China reported an increase in new COVID-19 cases on Monday, demonstrating negative demand expectations for the world’s largest energy consumer, the mainstay of global oil consumption.
Prices went into stress by Friday as the US crude inventories rose by 4.4 million barrels in the week of January 15, contrary to expectations of a 1.2 million barrels retracement, according to data from the Energy Information Administration.
Although the number of oil and gas drilling rigs added by US energy firms increased in the ninth week, it remained 52% below this period last year. This is likely due to plants’ desire to maximize output before spring, and the number of equipment is expected to increase further in the coming weeks.
In recent weeks, some support has come from the additional production cuts of the world’s largest exporter, Saudi Arabia.
Iran’s oil minister said Friday that the country’s oil exports have increased in recent months, and sales of oil products to foreign buyers have reached record levels, despite US sanctions.
Investors are waiting for the resumption of negotiations on the nuclear deal between the US and Iran. This could enable Washington to lift sanctions on Tehran’s oil exports and increase supply.