Restrictions began to be carried out by a number of European countries following the surge in Omicron COVID cases. No doubt, the prospect of demand was dimming.
World crude oil prices opened lower at the beginning of the week (20/December), overshadowed by market participants' concerns about the rapid spread of the Omicron COVID-19 which has the potential to dim the demand outlook. At the time of writing, Brent oil was in the range of $71.81 per barrel, down 2.03 percent from the daily Open level. Meanwhile, WTI has already slipped below the key $70 level and is trading at $68.88 a barrel.
Oil prices slump on Omicron
As the spike in Omicron COVID cases is becoming increasingly worrying in the European region, the Netherlands has announced restrictions ahead of the Christmas and New Year holidays. It is possible that this step from the Netherlands will be followed by other European countries amid a significant increase in Omicron cases in recent weeks.
The United States has also taken preventive measures to suppress the spread of Omicron. White House health adviser, Dr Anthony Fauci, urged people to follow health protocols while traveling and get booster vaccines.
"In general, market sentiment looks to be deteriorating at the start of the week and seems to be in line with the slump in US equity markets that occurred from the weekend through to the Asian session this morning," said Kelvin Wong, market analyst at CMC Markets.
Wong added, "(The decline in oil prices) is due to market participants' concerns over the restrictions put in place to reduce the spread of the Omicron variant which could suppress economic activity in many countries. This (potentially) overshadows future demand prospects."
US Oil Supply Potentially Increase
In addition to concerns regarding Omicron's COVID-19, oil prices were also pressured by data from US energy companies which reported an increase in the number of oil and gas rigs last week. For information, the number of Rigs is usually an early indicator of future production. If the Rig increases, it is certain that oil output will increase. In fact, the energy industry is still shrouded in uncertainty due to Omicron.
Market attention will then be focused on the announcement of OPEC's production policy after the members' meeting is held in early January 2022.
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