By Adedapo Adesanya
Crude oil prices plunged afresh on Tuesday as vaccine authorities doubted the efficacy of COVID-19 vaccines against the Omicron coronavirus variant, renewing worries about oil demand.
As a result, crude prices ended the month of November bearish with Brent crude futures falling by $2.87 or 3.9 per cent to settle at $70.57 per barrel and the United States West Texas Intermediate (WTI) crude futures losing $3.77 or 5.4 per cent to trade at $66.18 per barrel.
The market’s mood was dampened heavily when the head of drugmaker Moderna Inc, Mr Stéphane Bancel told the Financial Times that current vaccines will struggle with Omicron.
“There is no world, I think, where [the effectiveness] is the same level . . . we had with [the] Delta [variant].
“I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to … are like, This is not going to be good,” he was quoted as saying.
Mr Bancel added that the high number of mutations on the protein spike the virus uses to infect human cells meant it was likely the current crop of vaccines would need to be modified.
This is a complete turnaround from Pfizer’s CEO statement, Mr Albert Bourla, who said on Monday that its vaccine would likely work on the Omicron variant, adding that he doesn’t believe the variant would fully escape protection with existing vaccines.
Analysts noted that this ominous warning could likely lead to another wave of lockdowns which could result up in a loss of 3 million barrels per day oil demand in the first quarter of 2022.
Also pressuring prices was the statement by the US Federal Reserve Chair, Mr Jerome Powell that the US central bank likely will discuss speeding its reduction of large-scale bond purchases at its next policy meeting.
This is coming amid a strong economy and expectations that a surge in inflation will persist into the middle of next year, which could reduce demand for fuel.
With the latest development, it is now unclear if the Organisation of the Petroleum Exporting countries and allies (OPEC+) will put on hold plans to add 400,000 barrels per day to supply in January.
Prior to the Omicron news, the group was already weighing the effects of last week’s announcement by the US and other countries to release emergency crude reserves to cool energy prices.
OPEC+ meets on Thursday, December 2 to decide production levels for January. The group has already postponed a technical panel meeting from Monday to Wednesday to have more time to assess the potential impacts of the Omicron variant on oil demand.
The market will be waiting for corroborating news from the US Energy Information Administration (EIA) after the American Petroleum Institute (API) reported an inventory draw in crude oil.
The API estimated the inventory draw for crude oil to be 747,000 barrels.
US crude inventories have shed some 57 million barrels since the beginning of the year.
Dipo Olowookere