By Adedapo Adesanya
Crude oil fell by close to 2 per cent on Friday, ending the year bearish as infections surged to record highs around the world.
Despite this, the commodity posted its biggest gain since 2009 spurred by the global economic recovery from the COVID-19 slump and restraint from the Organisation of the Petroleum Exporting Countries its allies (OPEC+).
Yesterday, Brent crude lost $1.80 or 1.43 per cent to trade at $78.10 per barrel, while the United States West Texas Intermediate (WTI) crude closed $1.99 or 1.53 per cent lower to sell at $75.46 per barrel.
On the last day of 2021, Brent crude futures ended the year up by 53 per cent while US crude futures gained 57 per cent, the strongest performance for the two benchmark contracts since 2009 when prices soared more than 70 per cent.
Despite all manner of lockdowns and travel restrictions brought about by the coronavirus, demand for oil has remained relatively firm.
However, after rising for several straight days, oil prices stalled on Friday as COVID-19 cases soared to new pandemic highs across the globe, from Australia to the United States, stoked by the highly transmissible Omicron coronavirus variant.
Hundreds of flights were cancelled as the variant creates havoc both for travellers and for airlines that are having to cobble together flight crews as pilots, flight attendants, and ground crews become infected or are exposed to others who have been.
The remnants of the delta variant and the rise of the new omicron variant pushed the rate of new daily infections in the US well above 200,000 a day, according to figures from Johns Hopkins University.
Health experts warned Americans to prepare for severe disruptions in coming weeks, with infection rates likely to worsen amid increased holiday travel, New Year celebrations and school reopenings following winter breaks.
In many places in Australia, New Year’s Eve celebrations were muted or cancelled for the second straight year due to a surge of coronavirus infections, this time is driven by the highly contagious variant.
Despite these developments, global oil prices are expected to rise further next year as jet fuel demand catches up.
For the year 2022, crude consumption is expected to reach 99.53 million barrels per day, up from 96.2 million barrels per day this year, according to the International Energy Agency (EIA). That would be a hair short of 2019’s daily consumption of 99.55 million barrels.
That will put pressure on both OPEC and the US shale industry to meet demand – after a year when major producers were surprised by the rebound in the activity that overwhelmed supply and led to tight inventories worldwide.
On the supply front, OPEC+ will likely retain their current level of output cut by 400,000 barrels per day in February 2022 when they meet on January 4, 2022.
Modupe Gbadeyanka