0312 GMT: Crude oil futures slid during the mid-morning trade in Asia Dec. 22, as concerns over a new strain of the coronavirus remained entrenched in the market.
At 11:12 am Singapore time (0312 GMT), the ICE Brent February contract fell 16 cents/b (0.31%) from the Dec. 21 settle to $50.75/b, while the February NYMEX light sweet crude contract was down 18 cents/b (0.38%) at $47.79/b. Both markers had fallen 2.58% to settle at $50.91/b and $47.91/b, respectively, on Dec. 21.
The downward trajectory of the prices this morning can be attributed to the market's fear that the emergence of a mutant strain of the coronavirus in the UK could spread to the rest of the world rapidly and lead to tougher and longer lockdown measures. The mutant strain, called B.1.1.7, is reportedly 70% more transmissible and could therefore increase coronavirus caseload.
In order to curb the spread of the new strain of the virus, more than 40 countries have already banned arrivals from the UK, parts of which are reeling from tough restrictions.
"An escalation of European COVID-19 restrictions in response to fears around a new variant, which is supposed to be faster spreading, should, and did, of course, elicit a negative reaction from prices via the near-term global growth impact," Stephen Innes, chief global market strategist at Axi, said in a Dec. 22 note.
However, despite the downtrend in prices seen during the week starting Dec. 21, certain analysts remained optimistic.
"A COVID-19 relief deal was finally passed by [the] US Congress, the Pfizer/BioNTech vaccine was approved for rollout in the EU starting next week, and [because] the new virus mutations are not likely to be immune to the vaccine [that had] helped support the reversion rally," Innes added.
Pan Jingyi, market strategist at IG, said that while the latest mutation does raise the risk of vaccine escape, that stage has reportedly not been reached yet.
"Without downplaying the seriousness of this key risk we see into 2021, the hope is that current restrictions would buy enough time for vaccine deployment to be underway, keeping the constructive outlook for markets intact for the rest of 2021," she added.
Meanwhile, analysts surveyed by S&P Global Platts were bullish in their forecast for US commercial crude drawdown in the week ended Dec. 18, during which they expected stocks have declined 4.7 million barrels to around 495.4 million barrels.
Comprehensive data on weekly inventory reports by the American Petroleum Institute and the US Energy Information Administration will be released on Dec. 22 and Dec. 23, respectively.
