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Oil prices recovered some losses with WTI crude gaining over five per cent on Monday morning as investors were a bit cautious and focused on new coronavirus variant Omicron’s spread.
The spread of a new Covid-19 variant from South Africa, Omicron, resulted in sharp risk-off sentiment and sell-offs in global markets across the board on Friday. Brent fell 11.5 per cent on Friday, closing at $72.2 per barrel, the l`argest single-day drop since April 2020.
Brent rebounded 4.3 per cent to $75.85 a barrel, while US crude rose 5.15 per cent to $71.6 per barrel on Monday morning at 8.25 am UAE time.
“The developments highlight that we are still very much in the midst of the Covid pandemic. Omicron has been labelled as highly transmissible and a ‘variant of concern’ by the WHO. There are fears that the mutation might be more contagious than previous versions and that existing vaccines might be less efficient against it,” said Monica Malik, chief economist Abu Dhabi Commercial Bank.
The OPEC+ group will also be holding a crucial meeting on December 2 to decide on its output policy for January 2022 and beyond.
“Not only will OPEC+ have to assess the impact of Omicron on global demand, but also the release of Strategic Petroleum Reserves (SPR) by major oil-consuming countries, including the US,” she added.
“The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on December 2,” wrote analyst at ANZ in a note.
“Such headwinds are the reason it’s been only gradually raising output in recent months, despite demand rebounding strongly.”
