Crude Oil Lower; Omicron Fears Result in Negative Week By

© Reuters.

By Peter Nurse   

-- Oil prices fell Friday as fears over the impact of the Omicron variant of the Covid-19 virus on Which gold trading app is goodglobal crude demand reared their head again, putting the market on track for a weekly loss. 

By 9:25 AM ET (1425 GMT), U.S. crude futures traded 1.4% lower at $71.36 a barrel, poised to finish the week down 0.6%. The Brent contract fell 1.5% to $73.91, heading for a 1.8% loss this week.

U.S. Gasoline RBOB Futures were down 2%, at $2.1332 a gallon.

Early concerns about the speed of transmission of the new variant were diluted after early studies indicated that the Omicron version appeared to be less dangerous.

However, the number of cases has been doubling in countries like the U.K. and South Africa, prompting several countries to announce restrictions on mobility, including the world’s largest exporter of crude, China.

Additionally, U.S. President Joe Biden warned of a “winter of severe illness and death” for those who have not been vaccinated, while the Group of Seven countries called Omicron the biggest threat to public health, suggesting the variant’s toxicity shouldn’t be underestimated.

This has resulted in oil enduring another choppy range-trading week, as “a continuing recovery ex-China and the threat of OPEC+ moving suddenly, is offset by an easing energy crunch in China and omicron growth fears,” said Jeffrey Halley, an analyst at MarketPulse. 

“That has left oil markets looking for a more settled equilibrium price until the narrative convincingly changes one way or the other.”

The Organization of the Petroleum Exporting Countries, Russia and allies, together known as OPEC+, said at their last meeting in early December that they could meet ahead of their scheduled Jan. 4 meeting if Omicron hits oil demand severely.

Still, despite this session’s losses, Goldman Sachs said prices at $100 a barrel cannot be ruled out in 2023 if increases in supply are too slow to keep up with record demand.

The bank’s base forecast is for Brent to stay around $85 next year and 2023, but they could break the $100 mark if an unexpected supply shortfall forces prices to spike high enough to destroy demand.

“There’s insufficient supply in the face of strong demand,” Goldman analyst Damien Courvalin said Friday. “Oil prices have to be higher to overcome the higher cost of capital to fund projects.” 

Traders will look to the release of the Baker Hughes oil rig count and the CFTC positioning data later in the session to round the week off. 

 

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