Oil prices fell on Tuesday, extending sharp losses overnight, as the rapid spread of a newstrain of the novel coronavirus in the United Kingdom prompted several countries to close their borders to British travellers and freight.

US West Texas Intermediate (WTI) crude futuresdropped 30 cents, or 0.6 per cent, to $47.67 a barrel at 0156 GMT, while Brent crude futures fell 26 cents, or 0.5 per cent, to $50.65a barrel.

Both benchmark contracts slid nearly 3 per cent on Monday, partlyerasing recent strong gains on the back of the rollout of Covid-19 vaccines, seen as key to easing mobility restrictions.

Travel ban

After the UK government warned that a new variant of thevirus seemed to be spreading much faster than previous kinds, India, Pakistan, Russia, Jordan and Hong Kong joined European countries in suspending travel from Britain, and Saudi Arabia, Kuwait and Oman closed their borders completely.

“The nightmare before Christmas scenario has set in, with acombination of the 'mutant virus' compounded by Brexit angst,” said Stephen Innes, chief market strategist at Axi, referring todoubts over whether UK Prime Minister Boris Johnson can secure a post-Brexit trade deal with the European Union.

Markets crash on mutant virus fears

Innes said the oil market had been overbought, with longpositions outweighing short positions by around 4 to 1, so the sell-off was inevitable.

With the US dollar rising as a safe-haven currency, US-dollar priced oil is less attractive for buyers holdingother currencies, which added to pressure on oil prices.

“The downside risks are greater than the upside until webetter understand how politicians are going to react in 2021 -whether they're going to lock things down again,” Innes said.

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