Oil Prices Gain 5% After Omicron Induced Crash

By Adedapo Adesanya

Oil prices returned to the bullish territory on Monday amid news of lockdown plans in Europe following the emergence of a new coronavirus variant.

The global crude benchmark, Brent crude, rose by 5.2 per cent or $3.64 to settle at $73.52 per barrel, while the United States West Texas Intermediate (WTI) crude futures gained 5.4 per cent or $3.58 to trade at $69.84 per barrel.

Crude oil recorded six consecutive weeks of losses which worsened in the last week of November as a result of a 15 per cent decline.

The shrinkage was caused by the combination of the emergence of the Omicron COVID-19 variant, the Strategic Petroleum Reserves (SPR) release news, and more oil coming from the Organisation of the Petroleum Exporting Countries and allies (OPEC+) after the group agreed to stick to its output addition agreement in January as well.

On the Omicron front, reports in South Africa said cases there had only shown mild symptoms, putting ease to comments made at the onset by the World Health Organization (WHO) that it could be more resistant to vaccines thanks to its mutations.

Meanwhile, the US government said on Monday that the country’s ban on foreign nationals entering the country from eight southern African countries is something President Joe Biden’s public health advisers reconsider daily.

Prior to this, one of the market leaders, Saudi Arabia signalled optimism about the demand by hiking its official January crude oil selling prices for Asia and the United States—its biggest markets.

The Saudis raised the price of flagship Arab Light for Asia by $0.60 per barrel from December to a premium of $3.30 over the Dubai/Oman spread.

The OPEC+ group last week decided to continue increasing monthly supply by 400,000 barrels per day in January, even after a slide in prices driven by Omicron concerns.

Prices were also supported by diminishing prospects of a rise in Iranian oil exports after indirect US-Iranian talks on saving the 2015 Iran nuclear deal broke off last week.

In addition, Iraq’s Oil Minister, Mr Ihsan Abdul-Jabbar, gave a bullish outlook to the market noting that he expects oil prices to reach over $75.

He added that OPEC is trying to “positively contain” the energy market after recent headwinds.