Oil prices weakened after Kazakhstan's oil supplies returned gradually following civil protests last week. In addition, the increase in China's COVID cases also put pressure on oil prices.
World crude oil prices weakened in early trading due to the recovery of Kazakhstan's output. In addition, the widespread case of Omicron in China has prompted market concerns about the demand outlook. At the time of writing, the price of Brent oil was moving at $81.26 per barrel, while WTI (West Texas Intermediate) was trading at around $78.64 per barrel.
Oil prices weakened after the turmoil in Kazakhstan Despite the decline in two consecutive sessions, but technically, oil prices are still on the path of strengthening that formed since last week. It should be noted, last week's price gains were supported by reduced oil supplies from Kazakhstan following massive protests that spread across the country.
However, oil prices later corrected after Kazakhstan's largest oil company, Tengizchevroil (TCO), said it would gradually increase production to normal levels at the Tengiz field. This means that Kazakhstan's oil supply will increase again.
COVID Omicron Becomes New Threat In China
Meanwhile, market concerns resurfaced after a rapid increase in COVID cases in China, which is one of the world's largest oil consumers. The port city of Tianjing announced it will examine its 14 million residents in the next two days following the discovery of a new cluster of highly contagious Omicron variant COVID-19.
"While other countries are trying to adapt to coexist with COVID, China is pursuing a zero COVID policy. This is a risk for oil prices because China is the world's largest crude oil importer. Approaching the Lunar New Year which should support oil prices due to increased travel, now travel restrictions instead it threatens to be enforced so that it has the potential to depress oil prices," ING analysts said in a note.
Similarly, Phil Flynn also revealed the effect of the spread of Omicron on oil prices earlier this week. "Oil prices are following the stock market which moved lower earlier in the week due to concerns about Omicron," said the senior analyst at Price Futures in Chicago.
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