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Oil slid in Asia morning trade on Thursday despite a huge drop in U.S. crude stock, as the strength in the U.S. dollar and fresh fuel demand worries due to travel curbs and delays with coronavirus vaccines weighed on prices.
U.S. West Texas Intermediate (WTI) crude futures fell 33 cents, or 0.62%, to $52.52 a barrel at 0452 GMT, erasing Wednesday’s gain.
Brent crude futures fell 36 cents, or 0.65%, to $55.45 a barrel, after losing 10 cents on Wednesday.
The U.S. dollar gained broadly, with its index up at 90.753 from a January low of 89.206, subsequently pressuring dollar-priced commodities.
The oil market had been supported earlier this week by a surprisingly large decline in U.S. crude stockpiles in the week to Jan. 22, which analysts said was due to a pick up in U.S. crude exports and a drop in imports.
But attention is now turning back to demand concerns amid a rise in COVID-19 infections with contagious new variants, a slower rollout of vaccines in Europe, and travel curbs in countries such as China.
“We are moving from just a Q1 demand write off to now pricing in more demand pain in Q2 due to the slow vaccine rollout,” said Stephen Innes, chief global market strategist at Axi.
“Particularly from Europe where the slow vaccine roll-out and the extended lockdowns point to a double-dip recession.”
The European Union failed to make a breakthrough in crisis talks with AstraZeneca on Wednesday, and is making more comprehensive checks on vaccines before approval, which means a slower rollout of shots than former EU member Britain and growing public frustration.
The issue has been exacerbated by Anglo-Swedish AstraZeneca and Pfizer of the United States both announcing delivery hold-ups in recent weeks.
Adding to the demand worries, China, the world’s second-largest oil consumer, is now facing a surge in coronavirus cases and seeking to limit travel as it heads into what is normally the busiest travel season of the year, the Lunar New Year holiday.
“China – they were the ones supporting the market. If you have issues forming in China, that really puts a brake on the demand story for now,” said Commonwealth Bank Commodities Analyst Vivek Dhar.
The Chinese Ministry of Transport has forecast the number of trips that will be taken will be up 15% from last year, when the virus was raging, but down 40% from 2019.
Britain, in lockdown since Jan. 4, on Wednesday clamped down on travel, requiring people arriving from high-risk COVID-19 countries to quarantine for 10 days and barring outbound trips for all but exceptional reasons.
Australia on Thursday extended its suspension of quarantine-free travel with New Zealand, as the Pacific Island nation investigated two new positive cases of the South African COVID-19 variant.
“The economic backdrop remains uncertain as governments struggle to fight off the spread of COVID-19,” ANZ Research said in a note.
