Oil prices plunged today as new coronavirus lockdowns and tougher travel restrictions across Europe raised fears of a slump in fuel demand.
Worldwide standard Brent crude tumbled 4.7 per cent by the mid-morning, shedding more than $3 to stand at $61.60.
US counterpart West Texas Intermediate dropped by the same margin, falling back below the $60 level for the first time in a month.
In recent weeks, new optimism about the speed of vaccination rollouts, as well as oversized supply cuts by producer alliance Opec, had sent oil prices to their highest levels since prior to the pandemic.
However, a third wave of Covid-19 cases across Europe has forced several countries, including economic heavyweights Germany and France, to extend their lockdowns.
And new restrictions set to come into force in the UK from Thursday, which would see those trying to travel abroad without a legitimate reason fined up to £5,000, has also soured sentiment.
Jeffrey Halley, senior Asia-Pacific market analyst at Oanda, said that a spike in cases in India, the world’s third-biggest oil importer, could also add to the damage, which has seen both benchmarks shed about 6.0 per cent this week.
That is the worst weekly fall that the fuels have recorded this year.
The oil market will get another prod later today when the American Petroleum Institute (API) releases crude stockpile data.
Analysts have forecast a fall in inventories of 900,000 barrels for last week.
Rystad Energy’s head of oil markets Bjornar Tonhaugen said that it was the decline in road fuel use that had dented prices the most.
“The road to oil demand recovery appears to be full of obstacles as the world continues to fight the Covid-19 pandemic”, he said.
“Oil prices are declining again on Tuesday, proving that last week’s correction was not deep enough and that the market had been trading lately with an excessively bullish sentiment, overlooking the pandemic’s risk.
“The risks of the Covid-19 pandemic are very real and as most of Europe remains on lockdown ahead of Easter, road fuel demand is set to take a major hit in an otherwise busy season.
“Road fuels was the market segment that took the oil demand recovery by the hand, pushing overall liquids demand higher after last year’s plunge. Scaling back road fuels is like shortening the pillar of the overall oil demand recovery.”