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Crude oil futures plummet on concerns over new coronavirus strain

Singapore — 0335 GMT: Crude oil prices plummeted during the mid-morning trade in Asia Dec. 21, as concerns over a new highly infectious strain of the coronavirus raised fears of tightening lockdown and travel restrictions.

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At 11:35 am Singapore time (0335 GMT), the ICE Brent February contract fell $1.70/b (3.25%) from the Dec. 18 settle to $50.26/b, while the February NYMEX light sweet crude contract was down $1.54/b (3.13%) at $47.70/b. The fall in these markers has reversed an upward trend that saw both contracts rise by 4.58% and 5.33% on Dec. 18 to settle at $52.26/b and $49.25/b, respectively.

Market analysts attributed the steep fall in oil prices in the morning to the emergence of a highly infectious variant of coronavirus called B.1.1.7. The strain emerged in the UK, with the country enacting tougher restrictions to cope with the new strain.

"The new strain of the COVID-19 virus is worrying for the market, as it is believed to be more infectious, and could lead to a host of new travel restrictions, sapping oil demand," Pan Jingyi, market analyst at IG told S&P Global Platts on Dec. 21.

Several European countries, including France, Germany, the Netherlands, Austria and Italy and Belgium have announced travel restrictions pertaining to the UK in order to curb the spread of the virus, according to media reports.

Warren Patterson, head of commodities strategy at ING, told Platts on Dec. 21: "Over the past few weeks we have seen quite a bit of speculative money moving into the market, and the fear of more lockdowns and travel restrictions that this new virus strain has raised is causing some of that speculative money to close their positions."

Meanwhile, amid the coronavirus gloom, reports that a deal over a US stimulus bill worth nearly $900 billion has been reached among US lawmakers failed to reassure the market, even though such stimulus has long been considered essential to US economic recovery and oil demand.

"Congress needs to do much more, especially with the UK lockdown headlines playing a major factor worrying investors which country is next to get hit with the mutant strain," said Stephen Innes, chief global market strategist at Axi in a Dec. 21 note.