Oil prices drops 1% as rising coronavirus cases end supply-led rally

Brent crude fell 45 cents, or nearly 1%, to $54.65 a barrel by 0207 GMT, after dropping 2.3% on Friday.

TOKYO (Reuters) - Oil prices fell on Monday, extending losses that last week ended a rally driven by production cuts and strong Chinese demand, with the market's recovery outlook being called into question as coronavirus infections rise.

Brent crude fell 45 cents, or nearly 1%, to $54.65 a barrel by 0207 GMT, after dropping 2.3% on Friday. U.S. oil was down by 43 cents, also nearly 1%, at $51.93 a barrel, having declined 2.3% in the previous trading session.

The benchmarks had rallied in recent weeks, buoyed by the start of COVID-19 vaccine rollouts and a surprise cut of crude output by the world's biggest oil exporter, Saudi Arabia. Surging new infections throughout the world, however, have raised doubts about how long demand would hold up.

U.S. drillers added further pressure by putting more oil and natural gas rigs to work for an eighth consecutive week last week because rising prices have made production more profitable. Still, the number of operating rigs is less than half of the level of a year ago. [RIG/U]

"Shale producers have indicated they will continue to keep their spending under control," ANZ Research said in a note. "The economics also don't favour a surge in drilling, with half of the industry still uneconomical."

U.S. shale producers have quickly responded to market gains in recent years, winning market share as Saudi Arabia and other major producers such as Russia have cut production in an attempt to support global oil and gas prices.

In China, where new COVID-19 infections have been rising, more than 28 million people are in lockdown as Beijing tries to avoid a resurgence of the coronavirus in the country where it was first discovered.

 

(Reporting by Aaron Sheldrick; Editing by Tom Hogue)


(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel