Oil prices drop by 2% as new coronavirus strain triggers concerns over fuel demand recovery. Credit: Kristina Kasputienė from Pixabay.

Oil prices fell almost 2%, as the fast-spreading new strain of coronavirus in the UK sparked concerns over the recovery of fuel demand.

The new coronavirus strain has led to shut down of most of the UK, and also led many countries to shut their borders to travellers and freight from the UK.

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Brent crude futures dropped by 88 cents, or 1.7% to reach at $50.03 a barrel at 0730 GMT while US West Texas Intermediate (WTI) crude futures decreased by 92 cents, or 1.9%, to touch at $47.05 a barrel, reported Reuters.

Following the warning from the UK that a new type of the novel coronavirus seemed to be spreading faster than the earlier versions, several countries, including India, Russia, Jordan joined European countries in suspending travel from the UK. In addition, countries such as Saudi Arabia, Kuwait and Oman have completely closed their borders.

Axi chief market strategist Stephen Innes said: “The nightmare before Christmas scenario has set in, with a combination of the ‘mutant virus’ compounded by Brexit angst.”

Innes expressed doubts over the UK securing a post-Brexit trade deal with the EU.

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Adding further pressure on prices was the rise of the US dollar. The US-dollar priced oil does not serve to be attractive for buyers with other currencies.

Phillip Futures senior commodities manager Avtar Sandu said: “After the euphoria of vaccines rollout and a false sense of comfort that the coronavirus is going away, the emergence of the new strain and a reality of a disorderly Brexit, traders would rather take some profit off the table given the erratic movement of markets.”