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Oil prices slump on renewed lockdowns

Oil Storage tanks in the port in Tsing Yi, Hong Kong.


Oil Storage tanks in the port in Tsing Yi, Hong Kong.

  • Oil prices slumped Tuesday on lower demand prospects.
  • Germany said it would reimpose strict coronavirus containment measures and struggles along with other EU nations to roll out vaccines.
  • Markets are rattled by a sharp rise in US Treasury yields in recent weeks that have been fuelled by bets that the forecast strong bounce in economic activity this year will fan inflation.

Oil prices slumped Tuesday on lower demand prospects as Europe’s biggest economy Germany said it would reimpose strict coronavirus containment measures and struggles along with other EU nations to roll out vaccines.

European stock markets were mixed and US stock indices drifted lower after sharp losses in Asia.

On currency markets, the Turkish lira stabilised a day after plunging in reaction to news that President Recep Tayyip Erdogan sacked the country’s market-friendly central bank chief, raising concerns about another round of financial turbulence.

Germany will meanwhile enter a strict shutdown for five days over Easter amid surging virus rates, Chancellor Angela Merkel and regional leaders agreed Tuesday.

Neighbouring France should be vaccinating “morning, noon and evening”, President Emmanuel Macron said as he tackles criticism that the Covid-19 immunisation drive has been too slow.

France is facing a third wave of infections but is lagging behind many Western countries in terms of the number of people vaccinated.

Events in Europe are “hurting demand projections for crude oil”, noted ThinkMarkets analyst Fawad Razaqzada.

“Everything else being equal, it means that growth will be slower to pick up and inflationary pressures are likely to be weaker than previously thought.”

Across the Atlantic, the focus is on the first joint congressional testimony by Federal Reserve boss Jerome Powell and Treasury Secretary Janet Yellen, who were due Tuesday to answer questions on their policy response to the pandemic.

It comes as markets are rattled by a sharp rise in US Treasury yields in recent weeks that have been fuelled by bets that the forecast strong bounce in economic activity this year will fan inflation and force the bank to lift interest rates before 2024, as it has previously indicated.

The pair have repeatedly said they do not see the spike in inflation lasting and will maintain ultra-loose monetary policies – including record-low rates – until they have a grip on unemployment, and price rises are above two percent for an extended period.

Also on the radar this week is the auction of seven-year US Treasuries, which will be followed closely after last month’s weak sale sparked a sharp sell-off in bonds that sent yields soaring – yields go in the opposite direction to prices – and sparked a global market panic.


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