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Oil drops after strong rally as coronavirus variants weigh

Oil prices fell on Thursday, paring recent gains, as renewed lockdowns and the emergence of new coronavirus variants reduced the prospect of a swift demand recovery.

Brent crude fell 20 cents, or 0.3%, to $61.27 a barrel by 1453 GMT and U.S. West Texas Intermediate crude lost 19 cents, or 0.3%, to $58.49.

The Brent benchmark had risen in the previous nine sessions, its longest sustained period of gains since January 2019. Wednesday had marked the eighth daily gain for U.S. crude.

“The rally that has been on ‘til yesterday’s close may take some time to be repeated as finally the reality is being priced in, namely the slow pace of the oil demand recovery,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said.

World oil demand in 2021 will rebound more slowly than previously thought, the Organization of the Petroleum Exporting Countries said on Thursday, adding to a series of downgrades as the impact of the pandemic lingers.

The International Energy Agency (IEA), meanwhile, said that global oil supply is still outstripping demand because of COVID-19 lockdowns and the spread of virus variants.

“The forecasts for economic and oil demand growth are highly dependent on progress in distributing and administering vaccines, and the easing of travel restrictions in the world’s major economies,” the IEA said.

The market has been driven higher as OPEC and its allies, a group known as OPEC+, reduced output and Saudi Arabia pledged additional voluntary cuts.

But the IEA said a rapid stock draw expected in the second half of the year could set the stage for OPEC+ to start unwinding the supply curbs.

Further price pressure came from the end of a blockade by Libya’s Petroleum Facilities Guards at the port of Hariga. The stoppage at Hariga began last month and contributed to a decline in Libyan oil output.

Argentina’s oil output also started to rise, pressuring prices.

The continuous struggle caused by the emerging variants of the virus and doubts about the efficacy of vaccines also dampened sentiment.

A British scientist said the coronavirus variant found in the British county of Kent is likely “to sweep the world” and could undermine the protection given by vaccines.