Oil prices plunged $ 10 a barrel on Friday, their biggest drop in one day since April 2020, as a new variant of the coronavirus scared investors and added to fears that an oversupply could swell in the first quarter. .
Oil has fallen along with global stock markets over fears that the variant will dampen economic growth and fuel demand.
The World Health Organization has designated the new variant, which it named Omicron, as “of concern”, according to the South African Minister of Health. The United States, Canada, Great Britain, Guatemala and European countries are among those limiting travel from southern Africa, where the variant has been detected.
Brent crude stabilized at $ 9.50, or 11.6%, at $ 72.72 a barrel, a weekly decline of more than 8%. U.S. West Texas Intermediate (WTI) crude stabilized at $ 10.24 on Friday, or 13.1%, at $ 68.15 a barrel, down more than 10.4% on the week in trading at high volume after the Thursday Thanksgiving holiday in the United States.
“The market takes into account the worst-case scenario in which this variant causes massive destruction of demand,” said Bob Yawger, director of energy futures at Mizuho.
Both contracts fell to a fifth week of losses and their biggest drops in absolute terms since April 2020, when WTI first turned negative amid a coronavirus-induced supply glut. News of the variant caused turmoil in a market previously caught between producing and consuming countries.
“The biggest fear is that it is vaccine resistant and is a massive setback for countries that have benefited from their deployments,” said Craig Erlam, senior market analyst at OANDA.
OPEC + is also monitoring developments around the variant, sources said on Friday, with some expressing concern that it could worsen the outlook for the oil market less than a week before a meeting to set policy.
Scientists have so far only detected the Omicron variant in relatively small numbers, mainly in South Africa but also in Botswana, Hong Kong and Israel, but they are concerned about its high number of mutations that could make it resistant to vaccines and more transmissible.
Drugmakers Pfizer and BioNTech have said, if necessary, that they will be able to redesign their injection within 6 weeks and ship the initial batches within 100 days. South Africa’s foreign ministry said it would speak to Britain to try to get it to reconsider its travel ban.
“Our immediate concern is the damage this decision will cause to both tourism industries and businesses in both countries,” Foreign Minister Naledi Pandor said in a statement.
Oil prices rose earlier this week as the Organization of the Petroleum Exporting Countries and Allies (OPEC +) suggested it could cut production in response to a strategic release from major consumer member countries of the Agency. international energy.
Such a publication was likely to boost supplies in the coming months, an OPEC source said, based on the findings of a panel of experts advising OPEC ministers. The forecast darkens the prospects for a December 2 meeting at which the group will discuss whether to adjust its plan to increase production to 400,000 barrels per day in January and beyond.
“OPEC’s initial assessment of the coordinated release (of stocks) and sudden appearance of a new variant of the coronavirus raises serious concerns about economic growth and the oil balance in the coming months,” said said PVM analyst Tamas Varga.