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Oil dropped below $70 per barrel

Oil prices are declining as the rapid spread of omicron worsens the prospects for fuel demand. Oil prices fell by 5% on Monday, as growing cases of infection with the omicron coronavirus variant in Europe and the United States raise concerns among investors that new quarantine restrictions to combat its spread could hit fuel demand.

Brent continues to fall and is trading down 5.3% in London as of 9:07 a.m. London time. The global benchmark is trading at $69.60/bbl. WTI is also declining, with the February contract down 5.7% to $66.68. “Today’s Asia… The weak sentiment on oil prices seems to be consistent with the weakness seen in S&P 500 and Nasdaq 100 electronic mini futures,” said Kelvin Wong, market analyst at CMC Markets. “(This) is due to concerns of impending restrictions on economic activity to contain the current growing spread of the omicron variant of COVID-19 around the world, which could increase the risk of slowing demand.”

The Netherlands was closed on Sunday, and the possibility of introducing additional restrictions on COVID-19 on the eve of the Christmas and New Year holidays arose in several European countries. The Italian medical regulator said that probably 10-40 times more antibodies are needed to neutralize omicron. According to him, in this case, completing an effective vaccination cycle can be considered the third dose of vaccination. Representatives of the US Department of Health urged Americans on Sunday to get repeated vaccinations, wear masks, and be careful if they travel during the winter holidays, as the omicron variant has spread worldwide and should become the dominant strain in the United States.

New York State has broken a record for the number of new infections. New York Mayor Bill de Blasio has called on the federal government to increase the supply of tests and medicines to the city amid a jump in the number of infections caused by omicron. Meanwhile, US energy companies are increasing the number of drilling rigs for oil and natural gas production for the second week in a row this week. The number of oil and gas rigs, an early indicator of the future output, rose by three to 579 in the week to December 17, the highest since April 2020, energy services company Baker Hughes Co said in a report released on Friday.

Nevertheless, exports from Russia are to decline: oil exports and transit from the country are scheduled at 56.05 million tons in the first quarter of 2022, compared with 58.3 million tons in the fourth quarter of 2021, the quarterly export schedule published by Reuters on Friday showed. China’s diesel fuel exports fell 69% in November compared to last year as refineries opted for domestic supplies to ease the fuel crisis as state-backed refineries increased the pace of oil refining. The structure of the oil market is also showing signs of weakness. The nearest spread for Brent again briefly changed to a bearish picture on Monday, where the contango indicates an oversupply in the market.

Bearish factors intensify as we approach the holiday period, when a decrease in trading volumes may exacerbate price fluctuations. In addition, demand in Asia is falling as central banks lean toward tightening monetary policy to curb accelerating inflation. President Joe Biden’s economic plan has failed after Senator Joe Manchin rejected a spending package. “We can look forward to a week of great volatility,” said Geoffrey Halley, senior market analyst at Oanda Asia Pacific Pte. “But it is dangerous to assume that oil will fall far from current levels because OPEC is sitting and watching, and they have left themselves the space to react very quickly if necessary.”

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