Oil falls as fears over new Covid-19 strain linger

Oil gains 2% after draws in US product inventories

Brent crude was down $1.83, or 3.5%, to $50.43 a barrel by 1209 GMT while US West Texas Intermediate (WTI) crude was down $1.70, or 3.5%, to $47.40 a barrel.

Trump has threatened to reject the $892 billion stimulus deal passed by Congress.

Oil prices dropped on Wednesday after an industry report showed an unexpected rise in US crude oil inventories, and as President Donald Trump rattled markets by threatening not to sign a long-awaited US Covid-19 relief bill. Supporting crude price is a weakness in the USA dollar, recovery in equity markets, supply concerns relating to Nigeria and mixed inventory report. Some see potential for prices to fall further. "It reflects that we're seeing a market that's getting more in balance". On a 4-hour chart, WTI futures were down 1.11% to trade at $46.25.

"The oil market has been on a bull trend in the past month or so, ignoring negative factors, amid an optimism that a widening vaccine rollout would revive global growth, but investors' rosy expectations for 2021 have suddenly vanished due to a new variant of the virus", said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

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Rajasthan fields produced 9.6 per cent less crude oil at 476,990 tonnes as Mangala, Aishwarya and other fields in the Cairn block flowed less oil for a variety of reasons, according to data released by the Ministry of Petroleum and Natural Gas.

The American Petroleum Institute (API) reported on Tuesday that USA crude inventories have risen by 2.7 million barrels in the week to December 18, compared with analysts' expectations for a draw of 3.2 million barrels. In the previous week, the amount of oil in storage had reduced by 3.135 million barrels.

What's more, doctors in the United States are warning that the variant could already be in the country.

Hiroyuki Kikukawa, general manager of research at Nissan Securities said investors are in holiday mode and anxious about the new coronavirus variant, hence, limiting gains.

In addition to the above, another reason for the bearish crude oil prices could also be associated with the long-lasting US-China tussle, which is still not showing any signs of slowing downs as the US has imposed additional visa restrictions on the Dragon Nation, while also making serious accusations regarding a Russian hack on the US Treasury.