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Oil drops 1% as rising coronavirus cases end supply-led rally

Published 01/18/2021, 10:11 AM
Updated 01/18/2021, 10:20 AM
© Reuters.
LCO
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CL
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TOKYO, Jan 18 (Reuters) - Oil prices fell on Monday,
extending losses that last week ended a rally driven by
production cuts and strong Chinese demand, with the market's
recovery outlook being called into question as coronavirus
infections rise.
Brent crude LCOc1 fell 45 cents, or nearly 1%, to $54.65 a
barrel by 0207 GMT, after dropping 2.3% on Friday. U.S. oil
CLc1 was down by 43 cents, also nearly 1%, at $51.93 a barrel,
having declined 2.3% in the previous trading session.
The benchmarks had rallied in recent weeks, buoyed by the
start of COVID-19 vaccine rollouts and a surprise cut of crude
output by the world's biggest oil exporter, Saudi Arabia.
Surging new infections throughout the world, however, have
raised doubts about how long demand would hold up.
U.S. drillers added further pressure by putting more oil and
natural gas rigs to work for an eighth consecutive week last
week because rising prices have made production more profitable.
Still, the number of operating rigs is less than half of the
level of a year ago. RIG/U
"Shale producers have indicated they will continue to keep
their spending under control," ANZ Research said in a note. "The
economics also don't favour a surge in drilling, with half of
the industry still uneconomical."
U.S. shale producers have quickly responded to market gains
in recent years, winning market share as Saudi Arabia and other
major producers such as Russia have cut production in an attempt
to support global oil and gas prices.
In China, where new COVID-19 infections have been rising,
more than 28 million people are in lockdown as Beijing tries to
avoid a resurgence of the coronavirus in the country where it
was first discovered.


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