Oil drops after seventh weekly gain on virus mutation concern

More than 16 million Britons are now required to stay at home as a full lockdown came into force in London and the southeast of England, with some European countries taking steps to limit travel with the UK.

Oil fell in early Asian trading -- after posting a seventh weekly gain -- on concern a mutation of Covid-19 discovered in the UK could speed transmission of the virus and lead to more lockdown measures.

Market data is seen on part of an electronic board. Oil fell in early Asian trading amid concerns about a mutation of Covid-19 discovered in the UK. (Reuters)

Futures in New York dropped nearly 2% after closing at the highest level in almost 10 months on Friday. More than 16 million Britons are now required to stay at home as a full lockdown came into force in London and the southeast of England, with some European countries taking steps to limit travel with the UK.

The new development comes as vaccines are being rolled out in several countries and as the US closes in on a stimulus plan. Talks on a relief package have made headway, with Senate Majority Leader Mitch McConnell saying congressional leaders now have agreement on roughly $900 billion of spending to help the US economy weather the coronavirus pandemic.

Crude has rallied around 35% since the end of October on a series of vaccine breakthroughs that have created expectations for a recovery in energy demand next year. A weaker dollar has also boosted the appeal of commodities like oil that are priced in the currency. In the short term, however, prices are being buffeted by the fast-spreading virus leading to more stay-at-home orders.

There are concerns, however, that rising prices may lure producers to tap capacity that’s been sidelined during the pandemic. Drilling rigs targeting crude oil in the US rose for a fourth straight week and to the highest level since early May, according to data from Baker Hughes.