Oil prices dropped early on Monday as a stronger U.S. dollar and many countries still battling rising daily COVID-19 cases weighed on market sentiment at the start of the week.
Brent Crude traded down 0.29 per cent at $54.97, with prices down by around $2 a barrel from the middle of last week while WTI Crude prices went down by 0.15 per cent at $52.30.
Nigeria, Africa’s largest oil producer, will rely on earnings from oil to finance this year’s N13.588 trillion budget. The budget has $40 per barrel oil price as benchmark, daily oil production estimate of 1.86 million barrels per day (mbpd) (inclusive of condensates of 300,000 to 400,000 barrels per day), and about three per cent increase over the revised 2020 budget.
The lockdowns in Europe and the fairly slow start to vaccination programmes in many countries outweighed early yesterday good economic data out of China, which beat analyst estimates to post 6.5-per cent annual growth in its economy in the fourth quarter, compared to 6.1-percent growth expected by economists in a Reuters poll.
China is also the only major economy to have posted economic growth last year, of 2.3 per cent. All other major economies in the world are expected to have contracted in 2020, hit by the pandemic.
Still, China’s economic data wasn’t enough to wipe out a cautious approach to the oil market at the start of this week, as participants are still concerned that the spreading of the virus and the lockdowns will significantly weigh on oil demand in the first quarter. At the same time, vaccination programs are likely to take months before allowing a critical mass of economically active people to contribute to global economic recovery.
“Hopes about a speedy recovery in fuel demand continues to be challenged by lockdowns and the continued rapid spreading of Covid-19,” Saxo Bank said on Monday.