By Peter Nurse
Investing.com -- Oil prices weakened Monday, continuing the recent selloff as Covid-related lockdowns in Europe and the potential release of supply from Japanese strategic reserves weighed on the market.
By 9:05 AM ET (1405 GMT), U.S. crude futures traded 0.8% lower at $75.31 a barrel, while the Brent contract fell 0.8% to $78.31. Both benchmarks hit their lowest levels since the start of October earlier in the session, having fallen around 3% on Friday.
U.S. Gasoline RBOB Futures were up 0.1% at $2.2125 a gallon.
The prospect of a global coordinated release of oil from strategic petroleum reserves took a step closer to reality after Japanese Prime Minister Fumio Kishida said over the weekend that he was ready to help with efforts to combat soaring oil prices.
News emerged last week that the United States had contacted a group of top consumers over the possibility of these countries releasing oil from their emergency stockpiles. China has already said it is considering such a move.
Adding to the negative sentiment was the return of lockdowns to Europe, with Austria leading the way as nations enact strict measures to reverse the latest wave of rising Covid-10 cases.
Germany, Europe’s largest economy, has also refused to rule out the return to a national lockdown, with Chancellor Angela Merkel calling the latest surge worse than anything the country has experienced so far.
To complicate matters, riots broke out over the weekend in cities across the Netherlands and protesters clashed in the streets of Brussels in demonstrations over government-imposed restrictions, suggesting governments could have difficulties getting the new wave under control.
“Investors should recognize that the fundamental cause for the rise in oil prices has been the restart of oil demand,” said Naeem Aslam, the chief market analyst at AvaTrade.
“As a result, any threat to demand would certainly destabilize markets and drive down oil prices. If the newly reported coronavirus cases spread outside Austria, the oil market may see an overstock, causing prices to fall.”