As the omicron variation jolts markets and OPEC+ continues to boost supply, oil fell for the sixth week in a row, marking the longest sequence of weekly falls since 2018.
This week, West Texas Intermediate crude futures declined 2.8 percent. Investors are concerned about any potential demand impact due to the spread of the omicron form, which has been documented in at least six states in the United States. Since Tuesday, the number of Covid-19 infections in South Africa has nearly doubled. Meanwhile, OPEC and its partners agreed last week to add 400,000 barrels of petroleum per day to global markets in January, caving in to consumer pressure.
“The short-term demand outlook was shaky at best and if the U.S. sees new restrictions, the oil market could see a supply surplus by the end of the month,” said Ed Moya, senior market analyst at Oanda Corp.
Crude has fallen dramatically since late October, owing to measures by big consumers to access reserves and the appearance of a new virus type. Friday’s jobs report in the United States disappointed, putting a more hawkish Federal Reserve in a difficult position. Meanwhile, oil traders are fleeing the market due to the significant surge in volatility, with open interest across the major oil futures contracts plummeting to its lowest level in years.
While OPEC+ chose to keep delivering barrels to the market, the group effectively put a floor under prices by allowing itself to change its mind at any time. Ministers expressed concern about the impact of omicron on crude demand prior to this week’s meeting, but they were unsure how dangerous the new strain would become. The alliance now has more flexibility to deal with pricing swings because it has essentially kept its monthly meeting open.
In New York, West Texas Intermediate crude for January delivery fell 24 cents to $66.26 a barrel.
Brent crude for February delivery increased 21 cents to $69.88 per barrel.
Meanwhile, in Vienna, diplomats working to repair the nuclear deal between Iran and world powers face significant hurdles that require immediate attention, according to the chief European ambassador. The talks will begin again in the middle of next week.
