Oil Slips Further as Rising COVID-19 Infections Hits Demand.

Oil prices fell more than 2% as fresh coronavirus lockdowns revived worries about demand for oil products, even as tug boats struggled to move a stranded container ship blocking crude oil carriers in the Suez Canal.

Brent crude futures slid $1.33, or 2.1%, to $63.08 a barrel at 0559 GMT, after jumping 6% overnight.

U.S. West Texas Intermediate (WTI) crude futures dropped by $1.40, or 2.3%, to $59.78 a barrel, after climbing 5.9% overnight.

Oil prices have been steady this week despite the worries about the prevailing pandemic, which has resulted in some countries enforcing lockdowns to contain the spread of the new variant of  COVID-19. In addition, there have been vaccine halts in some countries in Europe due to the side effects caused by the AstraZeneca Vaccine.

However, following news on the Suez Canal grounding, potentially blocking 10 tankers carrying 13 million barrels, the trend reversed.

“The longer this disruption lasts the more likely we see refiners (and) buyers having to turn to the spot market to ensure supply from elsewhere,” ING Economics

Dozens of ships are in the five waiting zones for passage through the nearly 200 km (120 miles) canal, with more approaching the area.

Effect of rising COVID-19 Cases on Oil demand

while the focus is mainly on the lockdowns in Europe, there are also rising COVID-19 cases in places like India and Brazil, developing economies crucial for sustainable growth in oil demand.

On Wednesday, India reported its highest one-day tally of new infections and deaths and said a new “double mutant” variant of the coronavirus had been found.

Given the persistent demand worries and falling prices, expectations are growing that the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, will rollover their current supply curbs into May at a meeting scheduled for April 1, four OPEC+

“Oil markets are unlikely to renew their upward momentum aggressively until OPEC+’s next meeting in early April, which should leave production cuts unchanged,” Jeffrey Halley, Senior Market Analyst, OANDA.

OPEC and other producers had hoped to ease output cuts, but industry sources say a fresh wave of lockdowns around the world threatens to tear up those plans.

Read also: Oil Prices Edge Lower Amidst Concern on COVID-19 New Wave.