Oil prices fell around 1% on Monday as surging coronavirus cases and heightened tensions between the United States and China undermined the positive impact from an OPEC+ deal on production.
Brent crude fell 46 cents, or 0.9%, to settle at $48.79 a barrel. U.S. crude fell 50 cents, or 1.1%, to settle at $45.76 a barrel.
Prices came under pressure after Reuters exclusively reported that the United States was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.
Rising tensions between the United States and China, the world’s top oil consumers, have weighed repeatedly on the market in recent years.
China, the world’s top crude oil importer, has helped support crude prices this year. In the first 11 months of the year, China imported a total of 503.92 million tonnes, or 10.98 million bpd, up 9.5% from a year earlier.
The country’s November oil imports rose from the prior month, data from the General Administration of Customs showed.
Globally, a surge in coronavirus cases has forced a series of renewed lockdowns, including strict measures in the U.S. state of California and in Germany and South Korea.
U.S. gasoline consumption fell during the Thanksgiving holiday week to the lowest in more than 20 years, OPIS said, as fewer Americans traveled during the pandemic.
Both oil contracts gained around 2% last week after OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to increase output slightly from January but continue the bulk of existing supply curbs.
“They’re remaining a bit stingy, in terms of supplies during the peak northern hemisphere winter,” said John Kilduff, partner at Again Capital LLC in New York.
Capital Economics, an economic research company, said in a report it expects OPEC+ output will rise by less than the new agreement allows because of compensatory cuts and weak first quarter demand.
Following OPEC+’s deal, Morgan Stanley increased its long-term Brent price forecast to $47.50 a barrel from $45 and revised up its long-term WTI price forecast to $45 a barrel from $42.50.
Elsewhere, Iran has instructed its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday.
“Adding to the pressure on oil prices is the potential Iranian increase to production in three months,” said Edward Moya, senior market analyst at OANDA. “Iran is optimistic the U.S. will ease restrictions if they return back to the 2015 nuclear deal.”