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.
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.