(Bloomberg) -- Oil edged lower in Asia after dropping the most in seven weeks as a new strain of the virus discovered in the U.K. threatens more lockdowns in Europe and reduces travel on global routes,
Futures in New York for February delivery traded near $48 a barrel after closing down 2.6% on Monday. More than 16 million Britons are now required to stay at home after a full lockdown came into force in London and the southeast of England. Many countries have suspended travel with the U.K.
The new Covid-19 mutation is stoking concerns that more parts of the world may also face renewed restrictions on movement, curbing a recovery in global energy demand. In the U.S., New York Governor Andrew Cuomo said he believes the new strain is already circulating in New York.
Crude has surged more than 30% since the end of October, in part due to a series of vaccine breakthroughs, but the likelihood of additional stay-at-home measures is now threatening the rally and also weakening oil’s forward curve. Brent’s prompt timespread has moved back into a contango structure, a bearish signal where near-term prices are cheaper than later-dated ones.
Physical oil prices are also cooling as Asian refiners ease purchases after an earlier-than-usual buying spree. Abu Dhabi’s Murban crude was sold last week on the spot market below its official price for the first time since August, while differentials for Russia’s ESPO and Urals have also slumped.
Russia, meanwhile, said it intends to support a further increase in OPEC+ production at the group’s meeting next month, even as the new virus strain raises concerns about demand, said officials familiar with the country’s oil policy. The country is said to favor an increase of 500,000 barrels a day, the maximum supply increase allowed by the accord that emerged from the group’s talks in December.
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