Oil set for 6th straight weekly decline as Omicron jolts markets

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Crude oil has fallen sharply since October as consuming countries tapped their reserves and a new coronavirus variant emerged.

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Oil is poised for a sixth consecutive weekly decline as the Omicron variant shocks the market and leaves the door open for OPEC+ to adjust production plans if the pandemic causes drastic changes in demand.

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West Texas Intermediate crude futures surpassed an earlier gain of 4.1% on Friday and are on track to post the longest stretch of weekly losses since 2018. The Omicron version worries investors as the US reports at least six states with cases, while Covid-19 infections in South Africa have nearly quadrupled since Tuesday. In Vienna, Iran talks were shelved until next week, with a European envoy saying diplomats face huge challenges that require immediate solutions.

“The short-term demand outlook was at best and if the US looks at new sanctions, the oil market could see a supply surplus by the end of the month,” said Ed Moya, senior market analyst at Oanda Corp.

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Crude has declined sharply since the end of October, as major consumer countries exploited their reserves and the emergence of a new virus variant. On Friday, the Federal Reserve was put in another difficult position as US jobs data missed expectations. Meanwhile, a sharp increase in volatility has prompted oil traders to exit, with open interest in major oil futures contracts falling to their lowest level in years.

“Unless we don’t get any bad news about the new variants, the bottom will likely have reached Thursday,” said Giovanni Stanovo, commodity analyst at UBS Group AG.

prices

  • West Texas Intermediate crude for January delivery rose 24 cents to $66.74 a barrel at 1:13 p.m. in New York
  • Brent rises 68 cents to $70.35 a barrel for February settlement

Investors focused on OPEC+’s decision to add 400,000 barrels of crude per day to global markets in January, essentially giving themselves the option of changing the plan at short notice in order to keep a floor below prices.

Before the meeting, OPEC+ ministers indicated they were concerned about Omicron’s impact on crude oil demand, but were struggling to gauge how severe the new tensions would become. Keeping its monthly meeting effectively open, the Coalition now has more flexibility to address price volatility.

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