Oil prices drop below $65 a barrel amid resurging COVID-19

Crude Oil worker, OPEC, oil prices, Bulls hit back to support US crude oil amid panic sell-offs in global equity markets, Nigeria’s local oil players smashed by low crude oil prices

Crude oil prices drifted lower at the first trading session of the week in London. Oil traders are arbitrarily going short, on signs of more COVID-19 lockdowns in Europe.

At the time of drafting this report, Brent crude futures were down 0.57 per cent to trade at $64.16 a barrel, West Texas Intermediate futures lost about 0.54 per cent to trade at $61.11 a barrel after rolling over to the May 21 contract.

Both major oil benchmarks have lost more than 6per cent during the previous week but remained above the $60 mark.

Germany, Europe’s biggest economy is the latest economic juggernaut to consider extending restrictive measures, with a draft proposal that is aimed at extending the present lockdown period into a fifth month as the number of new COVID-19 caseloads tick up.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics elaborated more on other macros weighing on oil prices.

“The oil market is searching for answers, with analysts linking the oil price collapse to slow European recovery due to lockdowns and slow vaccine rollouts.

“This is neither a new nor compelling argument, but lower Asian pricing for Middle East crude and higher Chinese imports for Iranian supply are prime culprits, as is the general cross-asset risk-off tone, which isn’t helping matters.”

Bottom Line: Oil traders are currently undergoing a reality check on the account that oil energy demand still has a long way from a full demand recovery, and it’s the record levels of withdrawn production capacity that’s the main prop for the oil market. So, having crested $70/ barrel on sentiments alone, prices were always vulnerable to a pull-back.