The two major oil benchmarks are on track for a weekly loss, as prices fell again on Friday with the surge in cases of the Omicron variant in developed economies raising fears of further restrictions and blows for fuel demand.
Brent crude and WTI crude both lost more than 2% in the afternoon, trading at $ 73.46 and $ 70.89 per barrel, respectively.
This contrasts with the partial recovery last week, which put the brakes on six successive weeks of price declines, including a 13% drop in one day at the end of November.
Earlier this week, the International Energy Agency also lowered its demand expectations – anticipating a drop in world travel this winter as the variant spreads.
Meanwhile, concerns over fuel demand have wreaked havoc on airline stocks on the London Stock Exchange.
The UK reported three successive days of record Omicron cases on Friday evening – with 93,045 infections in the last 24 hours alone.
Hospitalizations have yet to rise at comparable rates – but Prime Minister Boris Johnson managed to push through controversial new restrictions this week, such as mask warrants, mandatory vaccinations for NHS workers and laissez-faire pass Covid-19 to join large gatherings.
He also held a press conference on Wednesday evening alongside his chief medical officer Chris Whitty, urging people to be careful this winter and not engage in unnecessary meetings – with critics accusing him of creating a stealth lock.
The UK is not alone in battling the Omicron variant, with Denmark set to announce new restriction measures with cases doubling every day in the country as US companies suspend plans to get people back to their homes. offices.
The Organization of the Petroleum Exporting Countries and Russia including (OPEC +) are due to meet on January 4 to discuss their supply plans.
So far, they have remained committed to increasing supplies by 400,000 barrels per day from January.
There are now fears of a surplus reaching 3.8 million barrels by March 2022.
Ole Hansen, head of commodities strategy at Saxo Bank, argued that in addition to the effect of the Omicron variant on demand, economic policy and milder temperatures in key markets were also limiting the growth of commodities. oil price.
He said: “A weaker dollar has been offset by tighter monetary policies, which may further ease growth prospects for 2022. As Europe faces a worsening energy crisis, milder weather As the normal in Asia has resulted in lower demand for fuel products used in power generation and heating.
In his view, that would delay further price hikes, but he still expected oil markets to recover later in 2022.
Hansen concluded, “We still maintain a long-term bullish view on the oil market as it will face years of likely underinvestment as the oil majors lose their appetite for big projects, in part due to an outlook. long-term uncertain for oil demand, but also increasingly due to credit restrictions on banks and investors due to the focus on ESG and green transformation. “