Following the massive sell-off on Thursday, oil prices dipped again early on Friday as bearish sentiment continued its hold on the market.
As of 9:47 a.m. EDT on Friday, WTI Crude prices were down 0.83 percent at $59.53, and Brent Crude was trading down 1.09 percent at $62.63, as concerns over short-term oil demand prevailed.
On Thursday, oil prices were dipping by 9 percent at one point before Brent settled 7 percent down on the day.
“From a fundamental perspective, there was little behind yesterday’s move. The market is becoming increasingly nervous around some countries in Europe imposing Covid-19 related restrictions once again, and in doing so raising concerns for the demand outlook,” ING strategists Warren Patterson and Wenyu Yao said on Friday, noting that the primary reason behind Thursday’s price plunge was the spike in U.S. treasury yields and the rallying U.S. dollar.
The higher dollar has been weighing on the oil market all week as a stronger greenback makes crude oil more expensive for holders of other currencies.
Some profit-taking is also pushing oil prices down, while market participants are focused on the negative short-term signals than the more bullish expectations for robust oil demand rebound later this year.
The spot oil market for physical barrels in the key demand region, Asia, is also showing signs of weakness, as it started to weaken in the middle of this week, with purchases from Chinese buyers subdued, traders tell Bloomberg.
The recent disruptions to EU vaccination programs have also made traders and speculators anxious that setbacks could delay the re-opening of the biggest economies, including travel abroad. Most EU nations that had halted vaccinations with the AstraZeneca vaccine over concerns about blood clots are resuming the shots after the European Medicines Agency (EMA) said on Thursday, again after a new review, that the vaccine is safe.
Yet, lockdowns in Europe are not over. France ordered a lockdown in Paris and 16 other areas for four weeks starting on Friday, placing 21 million people, or around a third of its population, on lockdown again over fears of a third wave of COVID-19 cases.
By Tsvetana Paraskova for Oilprice.com