Oil prices slip nearly 2% as new virus strain dashes recovery hopes

Oil prices dropped nearly 2 percent on Tuesday as a new strain of the novel coronavirus in the United Kingdom (UK) triggered concerns over fuel demand recovery.

Brent crude was down 72 cents at 1.4 percent to $50.19 a barrel in early morning trading while the West Texas Intermediate (WTI) crude fell 76 cents at 1.6 percent to $47.21.

Both benchmark contracts slid nearly 3 percent on Monday, erasing recent strong gains on the back of the rollout of COVID-19 vaccines, seen as key to easing mobility restrictions.

Source: FactSet.

After the UK government warned that a new variant of the virus seemed to be spreading much faster than previous kinds, India, Pakistan, Russia, Jordan and Hong Kong joined European countries in suspending travel from Britain, and Saudi Arabia, Kuwait and Oman closed their borders completely.

The negative sentiment completely overshadowed a weekend deal among U.S. congressional leaders for a $900 billion coronavirus aid package, and the rollout of a new vaccine in the United States on Saturday.

This is likely to be a source of worry for Nigeria as crude oil accounts for half of the government’s income and about 90 percent of Nigeria’s foreign exchange earnings.

The proposed 2021 budget is benchmarked at $40 per barrel.