Oil Bulls Stung by New Week in Red as Omicron Fears Return

(Updates with settlement prices)

By Barani Krishnan

Investing.com - The newest known variant of Covid isn’t going away, as much as oil bulls wish it would. 

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Omicron’s renewed grip on headlines this week is costing fresh losses to longs who just saw relief last week from six straight weeks of losses.

London-traded Brent, the global benchmark for oil, settled down $1.50, or 2%, at $73.52, after a session high of $74.97 and bottom of $72.65. For the week, Brent was down 3.3%. The global crude benchmark gained 7.5% last week after losing 18% six weeks prior when it fell to a four-month low of $65.80 from seven-year highs of $86.70 in mid-October.

West Texas Intermediate, the benchmark for U.S. crude, settled down 81 cents, or 2.1%, at $70.86 a barrel, after oscillating between a session peak of $72.25 and low of $69.94. Week-to-date, WTI was down 1.1% after last week’s outsized gain of 8.2%. Prior to that, U.S. crude had been down for six weeks back-to-back, losing 20% in all and falling to as low as $62.48 from this year’s peak of $85.41.

“We could see further consolidation around $70 in the coming sessions as we learn more about Omicron, what restrictions it will bring, and whether OPEC+ will react,” Craig Erlam, analyst at online trading platform OANDA.

OPEC+ — a 23-nation oil producing alliance led by the 13-member OPEC under Saudi Arabia and 10 others non-OPEC countries steered by Russia — has so far brushed aside talk of about the Omicron variant of the coronavirus becoming as disruptive to energy demand as the original Covid-19 strain that broke out in 2020.

In its monthly demand outlook released earlier this week, the Saudi-led OPEC said it saw the world consuming 99.13 million barrels per day of crude in the first quarter of 2022, up 1.1 million from its November forecast.

Rochelle Walensky, head of the Centers for Disease Control and Prevention, the agency leading America’s battle against Covid, said Omicron was "increasing rapidly" in the United States and was expected "to become the dominant strain in the United States as it has in other countries in the coming weeks". 

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The seven-day average of U.S. hospital admissions from Covid has increased about 4% over the prior week, while the seven-day average of daily deaths was up over 8% from the prior week, Walensky said.

But Walensky and other other global health officials have also repeatedly said the severity of Omicron as a Covid variant — i.e. how gravely it can make people ill or kill them — was not known. As protection though, they have urged people to get vaccinated, to at least acquire immunity against the strain. Officials say that while Omicron has emerged in people who have been inoculated, there is no evidence of it making them seriously ill.

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