Oil prices skid as new coronavirus strain fuels demand concerns

By Yuka Obayashi
TOKYO (Reuters) - Oil prices fell about 3% on Monday as a fast-spreading new strain of coronavirus that has shut down much of the UK fueled concerns about a slower recovery in fuel demand amid tighter restrictions in Europe.
Brent crude fell $ 1.54, or 3.0%, to $ 50.72 a barrel by 0510 GMT, after rising 1.5% to hit its highest since March last Friday.
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U.S. West Texas Intermediate (WTI) crude oil fell $ 1.42, or 2.9%, to $ 47.68 a barrel, after also climbing 1.5% on Friday, to its highest level since February.
Monday's decline came after oil prices rose for seven straight weeks for the past week as investors focused on the launch of COVID-19 vaccines.
"A tougher lockdown in the UK to fight a new type of coronavirus and travel restrictions in other European countries resulted in funds unwinding their long positions," said Chiyoki Chen, chief analyst at Sunward Trading, adding that concerns about the drag the Brexit talks also affected market sentiment.
"Brent could fall below $ 50 a barrel and WTI could fall below $ 45 this week as investors adjust their positions before the Christmas break," said Chen.
UK Prime Minister Boris Johnson will chair an emergency meeting on Monday to discuss international travel and the flow of goods to and from the UK as COVID-19 cases rose by a record number for a day. The headache comes as Johnson also tries to reach a final deal on Brexit.
The variant, which officials say is up to 70% more transmissible than the original, has also raised concerns about wider distribution, forcing several European countries to close their doors to travelers from the UK.
As vaccines progressed, money managers had increased their net long positions in US crude oil futures and options for the week ended December 15, according to the US Commodity Futures Trading Commission (CFTC).
"The oil market has been up for the last month or so, ignoring negative factors. It was optimistic that an expansion of vaccines would revive global growth, but investor rosy expectations for 2021 have suddenly faded due to a new twist on." the virus, "said Kazuhiko Saito, chief analyst at the commodity broker Fujitomi Co.
The negative sentiment also overshadowed a weekend deal among US Congress leaders for a $ 900 billion coronavirus aid package.
In addition to the pressure, the number of oil and gas rigs, a leading indicator of future production, rose eight to 346 in the week ending December 18, its highest level since May, Baker Hughes said on Friday as producers kept coming up Return to the Well Crude oil prices have been trading above $ 45 a barrel since late November.
Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Saturday that global oil demand is still between 6 and 7 million barrels per day (bpd) below pre-crisis levels.
(Reporting by Yuka Obayashi; Editing by Kenneth Maxwell)
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