Oil prices are falling due to renewed concerns about the coronavirus as cases increase in China

SINGAPORE (Reuters) – Oil prices dropped Monday amid renewed concerns about global fuel demand amid strict coronavirus blockages in Europe and new movement restrictions in China, the world’s second largest oil user, after a jump in cases there .

Brent crude futures fell 42 cents, or 0.8%, to $ 55.57 a barrel from 0146 GMT after an earlier rise to $ 56.39, the highest level since February 25, 2020. Brent rose in the previous four sessions.

US West Texas Intermediate (WTI) fell 22 cents, or 0.4%, to $ 52.02 a barrel. WTI rose to its highest level in nearly a year on Friday.

“Covid hotspots flaring up in Asia, with 11 million people (in) lockdowns in China’s Hebei province … along with a hint of FED policy uncertainty has led some gains out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note Monday.

Mainland China saw the largest daily increase in COVID-19 cases in more than five months, the country’s national health authority said Monday, as new infections in Hebei province, which surrounds the capital Beijing, continued to increase.

Shijiazhuang, the capital of Hebei and the epicenter of the new outbreak in the province, has been shut down with people and vehicles barred from leaving the city as authorities stop spreading the disease.

Most of Europe is now subject to the strictest restrictions, according to the Oxford stringency index, which assesses indicators such as travel bans and the closure of schools and workplaces.

Still, oil price losses were curbed by plans for US President-elect Joe Biden to announce trillions of dollars in new coronavirus bills this week, much of which will be paid by more loans.

Crude oil prices remained buoyed by Saudi Arabia’s pledge last week to voluntarily cut oil production of 1 million barrels per day (bpd) in February and March as part of a deal that will see most OPEC + producers cut production keep stable during new lockdowns.

“Oil still praises a lot of optimism about the introduction of Covid-19 vaccines,” said Innes.

“Demand will always improve as vaccines come to market, and the supply side is under control thanks to the continued efforts of OPEC + and Saudi Arabia.”