Oil prices fall 1%, following 11-month highs

22 Jan 2021

Oil prices declined on Friday, moving further away from last week’s 11-month highs, impacted by concerns the new coronavirus restrictions in China will hit fuel demand.

Reuters reports U.S. West Texas Intermediate (WTI) crude futures fell 65 cents, or 1.2%, to $52.48 a barrel after dropping 18 cents on Thursday.

Meanwhile Brent crude futures declined 58 cents, or 1.03%, to $55.52 a barrel, eradicating a 2 cent gain on Thursday.

According to Jeffrey Halley, senior market analyst at OANDA: “In line with the more cautious tone displayed by financial markets today in Asia, both contracts have retreated.

“The fall this morning leaves both contracts in the middle of their two-week ranges. They could be potentially vulnerable to deeper corrections if this evening official U.S. crude inventory data shows an unexpected climb.”

Pending the U.S. Energy Information Administration’s official oil inventory data, industry data published on Wednesday showed a 2.6 million-barrel rise in U.S. crude inventories last week, in comparison to 1.2 million forecast by analysts.

At the end of 2020, recovering fuel demand in China reinforced market gains, whilst the U.S. and Europe trailed behind. However, new restrictions in China have impacted the recovery.

“Global oil demand could decline marginally in the first quarter of 2021 as many regions, including many European countries, have re-introduced mobility restrictions,” according to analysts at Fitch Ratings in a note on Friday.

“The positive effects of vaccination programmes on the oil demand recovery may not be visible for several months until a critical mass of population is inoculated.”