After a seventh weekly gain, the price on oil has seen a drop to $47 per barrel. Numerous futures in New York saw sharp declines of around 3% after they closed on the highest yet in nearly 10 months. In addition to the mutation of the virus being identified in South Africa, where it is currently spreading across the country, the United Kingdom also discovered the mutation which threatens to speed up transmission, subsequently leading to stricter lockdowns. Current fears are drastically lowering the demand of oil globally, which could lead to substantial dips in the price of oil as there are numerous uncertainties surround the mutation of the virus.
Physical oil prices have also seen a decline due to Asian refineries easing purchases after there was a buying spree experienced much earlier than anticipated. Since the end of October, crude oil has rallied around 33%, riding on a series of vaccine breakthroughs. These have set the precedent for expectations for recoveries in the demand of energy next year. However, in the short term, the prices are being buffeted by the virus which is spreading faster than during the first wave of the pandemic, which is leading to a substantial number of orders for people to remain at home.
Head of commodities strategy at ING Groep NV, Warren Patterson, said that some speculative funds have been put into oil for now, attracted by a more constructive outlook for next year. However, with current developments and the mutation of the virus, speculators may become more skittish. West Texas Intermediate (WTI) scheduled for January delivery dropped 3.4% to sell for $47.44 per barrel, with the January contract expiring on Monday. The February contract saw a decline of 3.2% to sell for $47.65 per barrel while brent for February delivery dropped 3.3% to sell for $50.55.