Crude Oil Market Falls as Traders Sell-Off on Omicron Worries

December 2, 2021
crude oil market

By Adedapo Adesanya

The crude oil market fell on Wednesday as traders used the opportunity provided by the worries surrounding the Omicron variant of coronavirus to sell off the commodity.

While the Brent crude lost 36 cents or 0.5 per cent to trade at $68.87 per barrel, the United States West Texas Intermediate (WTI) lost 61 cents or 0.9 per cent to sell at $65.57 per barrel.

The US officials said the Omicron variant – believed more transmissible than previous strains of coronavirus – had been found in the country.

The first known US case was a fully vaccinated person in California who returned to the United States from South Africa on November 22 and tested positive seven days later.

The US also plans to announce stricter testing rules for international visitors.

Airlines in the world’s largest consumer of oil were told to hand over the names of passengers arriving from parts of southern Africa hit by Omicron.

This development adds to worries that could cut oil demand as global supply builds.

However, many warn that the market needs to ease the fears as much remains unknown about the new variant, which was first found on November 8 in South Africa and has spread to at least two dozen countries, including Nigeria.

The new variant has complicated the decision-making process for the Organisation of the Petroleum Exporting Countries and allies (OPEC+), which is meeting this week to decide whether to continue adding 400,000 barrels per day in supply to the markets.

Some analysts had speculated that OPEC+ could pause those additions in an attempt to slow supply growth, now expected to yield a surplus of 3.8 million barrels per day by March 2022.

According to reports, there is doubt about plans to change the current policy from several OPEC+ ministers who noted that even if they revise the increase, many producers will struggle to meet up to expectations due to infrastructural challenges.

Since August, the group has been adding an additional 400,000 barrels per day of output to global supply each month, as it gradually winds down record cuts agreed in 2020.

US Deputy Energy Secretary, Mr David Turk said President Joe Biden’s administration could adjust the timing of its planned release of strategic crude oil stockpiles if global energy prices drop substantially.

The US, in addition to other countries like China, Japan, South Korea, and the United Kingdom, announced plans in November to release 50 million barrels of its reserves into the market to try to cool energy prices.

The prevailing conditions did nothing to help even as the US Energy Information Administration (EIA) reported an inventory draw of 900,000 barrels for the week to November 26.

At 433.1 million barrels, the authority said crude oil inventories in the US remain below the five-year seasonal average.

Last week’s inventory move compares with a modest build of one million barrels for the previous week and 2.1 million barrels draw for the week before that.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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