The WHO said the Omicron variant had shifted to a globally dangerous stage after spreading in 60 countries. This has the potential to dim the demand outlook, thereby depressing oil prices at the beginning of the week.
World crude oil prices closed lower in trading earlier in the week after the World Health Organization (WHO) stated that COVID Omicron poses a potentially high risk globally. The price of Brent Oil is currently around $74.47 per barrel, while WTI oil is trading at $71.11 per barrel.
In its latest statement yesterday, WHO said that the Omicron variant has spread to 60 countries, so it has entered a global risk stage. Moreover, some evidence suggests this variant is resistant to vaccines. Previous allegations that the Omicron is harmless appear to have been pushed aside after the death toll in the UK.
Meanwhile, China is reportedly facing a new wave of COVID in Zhejiang. Hundreds of thousands of people are known to be undergoing quarantine, even though Zhejiang is one of China's major manufacturing hubs. This has the potential to overshadow the economic recovery and future prospects for oil demand.
"China is the largest importer of crude oil, so oil prices could potentially be under selling pressure if the wave of COVID spreads out of control in the world's most populous country," said Bob Yawger, director of energy futures at Mizuho in New York.
Await OPEC Policy, Oil Faces Downturn Outlook in 2022
Market participants also highlighted the actions of OPEC, which is scheduled to meet again on January 4 to decide on their production policies. Iraq's oil minister said on Sunday that he hoped OPEC would stick to its policy of increasing output gradually by 400,000 bpd every month.
It is possible that oil prices will be depressed again in early 2022. The reason is, apart from being overshadowed by the rapid spread of the Omicron variant, crude oil supplies have the potential to flood the market after the US reported that oil production from the Permian basin could reach a record high in January.
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