Oil prices tumble as new Covid outbreak in Europe threatens fuel demand

The price of crude continued to slide on Friday for the sixth day in a row. It is down nearly 9% for the week, as a new wave of Covid infections across Europe has led to new lockdowns and doubts over recovery in fuel demand.

Global benchmark Brent was trading around $63 a barrel on Friday, while US West Texas Intermediate (WTI) was down below $60 per barrel.

According to Goldman Sachs, the headwinds related to European Union demand and Iran supply could slow the oil market rebalancing by 0.75 million barrels per day (bpd) in the second quarter. Goldman said it expects OPEC+ will act to offset that.

“The market is becoming increasingly nervous around some countries in Europe imposing Covid-19-related restrictions once again and, in doing so, raising concerns for the demand outlook,” ING Economics said in a note seen by Reuters.

Some experts have also voiced concerns over worsening relations between the United States and Russia. Phillip Streible, chief market strategist at Blue Line Futures, told MarketWatch: "US-Russia tensions are increasing, with the US threatening sanctions on Russia. One way Russia could retaliate is to target shale producers by flooding the market with oil.”

The Joint Organizations Data Initiative website showed on Thursday that supplies of oil are plentiful at the moment, with Saudi Arabia’s crude exports increasing in January for a seventh straight month to the highest since April 2020.

Shipments from the world’s biggest oil exporter increased to 6.582 million barrels per day in January, from 6.495 million the previous month.

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