On Monday, December 21, oil prices lost about 2.5, after reports of the discovery of a new strain of the COVID-19 virus in the UK, putting the prices under pressure. In these situations, the short-and medium-term threats to the oil market from the demand side have greatly increased. The situation is further complicated by the fact that it will take between three and four weeks to assess the efficacy of the coronavirus vaccine produced by Pfizer and BioNTech, during which a high degree of uncertainty will remain.
February Brent crude futures traded in the red by -2.58 percent at $50.91. February WTI crude futures were down by -2.77 percent to $47.74.
A strict quarantine was enforced in the UK with the introduction of a new strain of the virus, and a number of countries prevented air travel to the United Kingdom. This strain has already been established in Italy, posing a threat to increased restrictive measures within the EU. The uncertainty will continue as long as the developers of coronavirus vaccines do not confirm their efficacy in combating a new strain. Testing vaccines will take anywhere from three to four weeks, European virologists estimate.
It is clear that the threats to the oil market from the demand side have risen dramatically in these circumstances. At the same time, with the introduction of the vaccine and the stabilization of the global economy, the scenario of a rapid return of life to normal is not yet justified, or at least postponed for some time. Against this backdrop, there has been a large increase in the risk of increased oil price volatility.
A small decrease in demand for oil from Asian refiners after a stretch of successful purchases a few weeks earlier is also worth noting. This puts more strain on the ‘black gold’ prices.
As for oil market statistics, weekly data from the American Petroleum Institute (API) on crude oil reserves in the United States will be published on Wednesday, which has reported an increase of 1.973 million barrels in the previous week.