Daily Management Review

Saxo Bank: Oil may fall in price by 10% due to new COVID-19 strain


Ole Hansen, Head of commodity strategy at Saxo Bank, believes that the emergence of a more contagious strain of coronavirus could result in a drop in oil prices due to possible new lockdowns.

Albert Bridge
Albert Bridge
By the evening of December 23, Brent crude was trading at $51 a barrel on London's ICE exchange, but in the morning, it had dropped as low as $49.

"The optimism about vaccines and monetary stimulus, which has helped the dollar fall, has been a key factor in the rampant speculation in markets, including oil", said Hansen 

"And while oil prices will continue to rise in 2021, the short-term outlook for oil has deteriorated," said Mr Hansen. There is a risk that Brent would retreat 10% to $46 a barrel before it finds support".

Brent has consolidated above $50 a barrel in December. This is the best value since March. 

Following news of a coronavirus mutation in the UK, European stock indices fell 3.5-4.6% in trading on 21 December.

source: reuters.com