As consuming countries have used reserves and a new variant of the coronavirus has emerged, crude oil has fallen sharply since October.
Oil is expected to fall for the sixth consecutive week as the variant of omicron shocks the market. If the pandemic changes demand sharply, OPEC+ opens the door to adjust its production plan.
West Texas Intermediate crude oil futures pared their earlier gains of 4.1% on Friday and are expected to record the longest weekly decline since 2018. The omicron variant continues to worry investors because the US has reported cases in at least six states, and the number of Covid-19 infections in South Africa has almost quadrupled since Tuesday. In Vienna, the Iranian negotiations were not put on hold until next week, and a European envoy stated that diplomats face major challenges that need to be resolved urgently.
Ed Moya, senior market analyst at Oanda Corp, said: “The short-term demand outlook is unstable at best. If the United States sees new restrictions, there may be an oversupply in the oil market by the end of the month.”
Due to measures taken by major consumer countries to tap their reserves and the emergence of new virus variants, crude oil prices have fallen sharply since late October. Due to lower-than-expected US employment data, the more hawkish Fed was in trouble on Friday. At the same time, the sharp increase in volatility prompted oil traders to withdraw, and open interest in major oil futures contracts fell to their lowest levels in years.
UBS commodities analyst Giovanni Staunovo said: “Unless we get some bad news about the new variants, we may have bottomed out on Thursday.”
- At 1:13 pm in New York, West Texas Intermediate crude oil for January delivery rose 24 cents to $66.74 per barrel
- Brent crude oil’s February settlement price rose 68 cents to $70.35 per barrel
Investors are also concerned about OPEC+’s decision to add 400,000 barrels of crude oil a day to the global market in January. By giving itself the option to change the plan within a short period of time, it essentially laid the bottom line for prices.
Before the meeting, OPEC+ ministers expressed that they were worried about the impact of European and American light on crude oil demand, but they were trying to figure out how serious the new pressure would become. By effectively maintaining monthly meetings, the alliance can now respond more flexibly to price fluctuations.