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Oil slips again as new coronavirus strain proves 'nightmare before Christmas'

Published 22/12/2020, 03:20
Updated 22/12/2020, 03:24

By Sonali Paul
MELBOURNE, Dec 22 (Reuters) - Oil prices fell on Tuesday,
extending sharp losses overnight, as the rapid spread of a new
strain of the novel coronavirus in the United Kingdom prompted
several countries to close their borders to British travellers
and freight.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
dropped 30 cents, or 0.6%, to $47.67 a barrel at 0156 GMT, while
Brent crude LCOc1 futures fell 26 cents, or 0.5%, to $50.65
a barrel.
Both benchmark contracts slid nearly 3% on Monday, partly
erasing recent strong gains on the back of the rollout of
COVID-19 vaccines, seen as key to easing mobility restrictions.
After the UK government warned that a new variant of the
virus seemed to be spreading much faster than previous kinds,
India, Pakistan, Russia, Jordan and Hong Kong joined European
countries in suspending travel from Britain, and Saudi Arabia,
Kuwait and Oman closed their borders completely. "The nightmare before Christmas scenario has set in, with a
combination of the 'mutant virus' compounded by Brexit angst,"
said Stephen Innes, chief market strategist at Axi, referring to
doubts over whether UK Prime Minister Boris Johnson can secure a
post-Brexit trade deal with the European Union. Innes said the oil market had been overbought, with long
positions outweighing short positions by around 4 to 1, so the
selloff was inevitable.
With the U.S. dollar rising as a safe-haven currency,
U.S.-dollar priced oil is less attractive for buyers holding
other currencies, which added to pressure on oil prices.
"The downside risks are greater than the upside until we
better understand how politicians are going to react in 2021 -
whether they're going to lock things down again," Innes said.

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