Energy

Oil slides 2% as growing Covid case count weighs on demand projections

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An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil dropped towards $50 a barrel on Tuesday, adding to losses from the previous session, as a mutant variant of the coronavirus in Britain revived concerns over demand recovery.

Detection of the new variant prompted several countries to close their borders to Britain. The BBC cited France's Europe Minister as saying that the two countries would announce a deal to restart freight by Wednesday.

Brent crude fell 83 cents, or 1.63%, to $50.08 per barrel, while West Texas Intermediate (WTI) crude settled 95 cents, or 2%, lower at $47.02 per barrel.

Both benchmarks slid nearly 3% on Monday, partly erasing recent gains driven by the rollout of COVID-19 vaccines, seen as key to allowing a return to normal life.

The latest rally culminated in Brent hitting $52.48, its highest since March, on Friday. Prices have then come down amid concerns about the virus spreading. Some see potential for prices to fall further.

"The holiday malaise has set in on oil," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "Now that we have stimulus done, and we still have concerns about the new strain of virus, people are heading to the sidelines," he said.

Oil gained support from U.S. Congress approval of a $892 billion coronavirus aid package after months of inaction.

In focus will be the latest U.S. oil inventory reports, expected to show crude stocks fell by 3.3 million barrels. The American Petroleum Institute's report is due at 2130 GMT.

The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, are set to boost output by 500,000 barrels per day in January. There is no sign yet of any wavering induced by the price drop.

Russian Deputy Prime Minister Alexander Novak on Monday said the rise in output should not result in a glut.