Crude Oil Higher; Omicron Variant and OPEC+ Meeting in Focus

  • Commodities News
Crude Oil Higher; Omicron Variant  and OPEC+ Meeting in Focus

By Peter Nurse -- Oil prices pushed higher Monday, rebounding after Friday’s rout as traders digest the latest information surrounding the new Covid variant ahead of this week’s meeting of top producers to discuss future output.

By 9:10 AM ET (1410 GMT), U.S. crude futures traded 6.8% higher at $72.80 a barrel, having slumped over $10 in the previous session, their largest daily drop since April 2020, while the Brent contract rose 5.8% to $75.77, after falling $9.50 on Friday.

U.S. Gasoline RBOB Futures were up 6.7% at $2.1133 a gallon.

Governments worldwide imposed travel curbs on travellers from southern Africa during the weekend to limit the spread of the new Covid variant, labelled omicron, amid fears its mutation could make it resistant to vaccines.

The World Health Organization said Monday the variant poses a "very high" global risk where Covid-19 surges, and could have "severe consequences" in some areas. The U.N. body also stressed that there remains ‘substantial uncertainty’ over the dangers it poses.

However, South African health experts, who first discovered the variant, have indicated that the new symptoms have been mild so far, while Moderna (NASDAQ: MRNA ) CEO Stephane Bancel and Pfizer (NYSE: PFE ) CEO Albert Bourla have both expressed confidence that their vaccines can be quickly adapted to fight the new variant.

“Given the lack of information on the latest variant, one could probably question the scale of Friday’s selloff and whether it is really justified,” analysts at ING said, in a note.

Adding to the renewed confidence was speculation that the Organization of the Petroleum Exporting Countries and Russia, a group known as OPEC+, will decide not to raise output in January, reflecting the new outlook for fuel demand and the decision by the U.S. and other major importers to release strategic reserves in the coming months.

The group meets on Thursday, and had been previously expected to agree to add 400,000 barrels a day to global supply, continuing its stance of cautiously adding output to the market as demand rebounds.

“With the potential demand hit, we believe the group could take a pause in its current supply increases,” said analysts at ING. “This would be consistent with the cautious approach OPEC+ has taken since the initial outbreak of Covid-19.” 

The Commodity Futures Trading Commission’s data on net speculative positioning will be released later in the day, having been pushed back from Friday due to the Thanksgiving holiday.


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