Oil prices drop 4pc as new lockdowns undermine hopes for economic recovery

• Traders shrug off Suez Canal incident

• Big gains unlikely until OPEC meeting on April 1

NEW YORK: Oil prices fell 4% per barrel on Thursday, extending a string of market weakness on renewed lockdowns in Europe and Asia to head off a rising coronavirus infection rate.

Prices lost much of the gains from the previous session that followed news of a large container ship running aground in the Suez Canal. The ship has still not been freed, but for now the market was shrugging off the blockage, as only a small percentage of the world’s crude is shipped through the canal.

Brent crude fell $2.46, or 3.8%, to settle at $61.95 a barrel. US West Texas Intermediate (WTI) crude fell $2.62, or 4.3%, to settle at $58.56 a barrel.

Countries in Europe are renewing restrictions to curb COVID-19 cases, which will reduce demand from the region. Germany, the largest European economy, saw its biggest increase in coronavirus cases since January.

“Germany, Italy and other areas in the eurozone are going backwards and the demand destruction is basically overwhelming,” said Bob Yawger, trader at Mizuho in New York.

In parts of western India, authorities ordered people indoors as new coronavirus infections hit their highest level in five months.

Vaccine distribution has been faster in the United States than all but a few countries, but health experts are concerned that spring break travel will spur an increase in US COVID-19 cases.

The strong dollar also weighed on oil prices. The dollar hit a new four-month high against the euro as the US pandemic response continued to outpace Europe’s. A rising US dollar makes greenback-denominated oil more expensive for holders of other currencies.

The Organization of Petroleum Exporting Countries and allies, together called OPEC+, are expected to roll over their current supply curbs into May at a meeting scheduled for April 1, four OPEC+ sources told Reuters. The group recently declined to increase supply on worries that COVID-19 infections would rise again.

US crude inventories rose on Wednesday to their highest since December, adding to global supplies.

The market was also under pressure as producers faced difficulties selling to Asia, especially China. Asian buyers instead took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said.