A slower recovery would be more likely to produce long-term ‘scarring’ that could weigh on the bloc in the future.
Oil dropped towards $50 a barrel on Tuesday, adding to losses from the previous session, as a mutant variant of the coronavirus in the United Kingdom revived concerns over demand recovery.
Detection of the new variant prompted several countries to close their borders to the UK. The BBC cited France’s Europe Minister as saying that the two countries would announce a deal to restart freight by Wednesday.
Brent crude was down 60 cents, or 1.2 percent, at $50.32 a barrel by 16:58 GMT, while US West Texas Intermediate (WTI) crude fell 72 cents, or 1.5 percent, to $47.25.
Both benchmarks slid nearly 3 percent on Monday, partly erasing recent gains driven by the roll-out of COVID-19 vaccines, seen as key to allowing a return to normal life.
The latest rally culminated in Brent hitting $52.48, its highest since March, on Friday. Prices have then come down amid concerns about the virus spreading. Some see potential for prices to fall further.
“The holiday malaise has set in on oil,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Now that we have stimulus done, and we still have concerns about the new strain of virus, people are heading to the sidelines,” he said.
Oil gained support from US Congress approval of an $892bn coronavirus aid package after months of inaction.
In focus will be the latest US oil inventory reports, expected to show crude stocks fell by 3.3 million barrels. The American Petroleum Institute’s report is due at 21:30 GMT.
The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, are set to boost output by 500,000 barrels per day in January. There is no sign yet of any wavering induced by the price drop.
Russian Deputy Prime Minister Alexander Novak on Monday said the rise in output should not result in a glut.