Omicron fears fuel Brent rise after dip below $70

Fears that the Omicron variant could delay the OPEC+ oil supply have increased

Oil prices witnessed strong gains on Wednesday as attention shifted towards this week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) together with its allies,10 other major oil-producing and exporting nations (OPEC+). 

However, the success of this joint effort was immediately called into question after oil prices rose following the announcement.

Omicron and oil prices

Tuesday saw Brent crude futures fall below $70 per barrel for the first time since August as the market reacted to the reimposition of restrictions in certain parts of Europe and North America in light of the Omicron Covid-19 variant. 

Throughout Autumn, prices for the commodity had steadily ticked higher as demand far outstripped supply and OPEC+ refused to accelerate easing the production curbs implemented at the height of the Covid-19 crisis, despite the exhortations of US President Joe Biden. 

Shortly before last Friday’s crash of almost $10 in the price of Brent, the US and China took the unprecedented step, in conjunction with a number of other nations, to release their strategic petroleum reserves to the global market to help bring oil prices down from their multi-year highs.

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Uncertainty over OPEC+ response

Although the initial market shock triggered by the Omicron variant may have achieved what Beijing and Washington could not, it is now feared that OPEC+ may opt to suspend the addition of 400,000 barrels per day (bpd) of supply planned for Jauary in light of the new strain. 

Further complicating matters, Wednesday saw the publication of the latest data from the US Department of Energy (DoE), which indicated that oil demand in the US has begun to fall. Last week, US crude stocks fell by 909,000 barrels. 

By 16:50 (GMT), Brent crude and US crude spot both traded up by 1.6% at $70.86 per barrel and $67.55 per barrel, respectively. 

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