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Sharp decline in oil prices in international markets - executive summary

Sharp decline in oil prices in international markets – executive summary

Oil prices were now in a free fall, down 10% from Thursday’s close, due to the risks to demand posed by the novel coronavirus variant detected in South Africa.

At around 4:00 PM (Lisbon time), the price of a barrel of Texas WTI Oil for January delivery fell 11.30% to $69.53.

The price of a barrel of Brent North Sea (European standard) decreased by 10.23% to $73.81.

These dips mean that in one session, the gains of the past two months have been wiped out, with WTI and Brent crude trading at the same prices as they were in mid-September.

“Oil is falling due to concerns about the new alternative,” analyst Craig Erlam was quoted by AFP as saying.

The new type of coronavirus, identified so far as B.1.1.529, was first identified in South Africa and has the potential to spread rapidly, according to scientists, who are not sure at this point whether currently available vaccines are effective. against it.

Several European countries have already decided to suspend flights from South Africa, and others, such as Japan, have opted to impose quarantines.

“The fear that others will implement new containment measures and travel restrictions is punishing oil even more,” says Fouad Razakzadeh, of Thinkmarkets.

According to Erlam, investors are concerned “about the impact of these travel restrictions,” whether real or potential.

“Even without strict restrictions, people will be more cautious, which will affect demand,” he added.

Attention is focused on the Organization of the Petroleum Exporting Countries (OPEC) and its ten allies in OPEC +, who will meet next Thursday to determine the development of the joint supply from the beginning of next year.

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In addition to the risks associated with this new format, it was announced this week that the United States and other countries will use their strategic reserves to increase supply and lower oil prices.

Oil prices, which fell below $20 at the height of the pandemic, have recovered in recent months, reaching high levels in late 2018.