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Oil extends losses as omicron concerns mount

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Crude oil futures were lower in mid-morning trade in Asia Dec. 15, extending losses from the previous session, as concerns over an impending surge in COVID-19 cases from the omicron variant mounted.

At 10 am Singapore time (0200 GMT), the ICE February Brent futures contract was down 53 cents/b (0.72%) from the previous close at $73.17/b, while the NYMEX January light sweet crude contract fell 60 cents/b (0.85%) to $70.13/b.

Concerns over the omicron variant once again took center stage as emerging news showed the fast-spreading nature of the virus, as well as government responses to curb the spread, which in turn is expected to hurt oil demand.

A South African study out Dec. 14 showed that a two-dose regime of Pfizer-BioNTech’s COVID-19 vaccine was less effective in keeping omicron-infected people out of the hospital compared to the delta variant, though protection was still high at about 70%.

Data from the US Centers for Disease Control and Prevention Dec. 14, meanwhile, showed that the omicron variant was spreading rapidly though the country and may cause a significant surge in infections as soon as January.

The omicron variant accounted for 3% of COVID-19 infections in the country as of Dec. 11, the CDC said.

“The wall of worry just got too high … Despite another optimistic study for the Pfizer COVID vaccine, the current surge is starting to see hospitalizations rise across some heavily vaccinated [US] states,” OANDA senior market analyst Edward Moya said in a note Dec. 15.

“Demand for jet fuel and kerosene is likely to be hit as restrictions persist, amid rising numbers of COVID-19 cases, and [as] the public shuns travel,” ANZ Research analysts Brian Martin and Daniel Hynes said.

While analysts maintained that the long-term outlook for oil remained bullish, prices were expected to remain highly volatile in the interim as investors responded to news about the virus.

“We expect Brent to consolidate within $70-$75/b in the near term, and expect crude oil to continue its rally in 2022,” OCBC Treasury Research analysts said in a note.

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