Crude oil futures declined in mid-morning trade in Asia Dec. 14, as recent reports showing a growing impact from the COVID-19 omicron variant threat overshadowed a bullish outlook from OPEC’s latest monthly report, reports Platts.
NYMEX light sweet crude
At 9:56 am Singapore time (0156 GMT), the ICE February Brent futures contract was down 18 cents/b (0.24%) from the previous close to $74.21/b, while the NYMEX January light sweet crude contract fell 14 cents/b (0.2%) at $71.15/b.
Oil markets saw choppy trading during the Dec. 13 session, as risk-on sentiment earlier in the day was later overshadowed by growing concerns of a hit to oil demand from the omicron variant. Despite rising by close to 2% in the Asian session Dec. 13, crude prices later pared gains to end the day in the red.
The declines came as the UK Dec. 13 reported its first death from the omicron variant, while the government warned of a “tidal wave” of omicron infections soon to come. Meanwhile, an increasing number of companies in Europe were urging staff to work from home.
OPEC+
In China, authorities Dec. 13 reported the first confirmed case of the variant on the country’s mainland, increasing the chances Beijing could institute broad lockdowns in line with its “zero-COVID” policy.
“Crude prices were unable to shake off the wave of risk aversion that hit equities on worries over the coronavirus impact to the short-term crude demand outlook and accelerated removal of accommodation by the Federal Reserve,” said OANDA senior market analyst Edward Moya in a note Dec. 14.
Still, analysts were optimistic that any sustained hit to oil demand would be met by a response from the OPEC+ producer group. The group had left open the possibility of making “immediate adjustments” to its monthly output hike at its last meeting in early December.
Conflicting sentiments were also seen in OPEC’s latest monthly oil market report. The group Dec. 13 sharply raised its forecast for oil demand in the first quarter of 2022, narrowing a projected oversupply, as it expects the omicron variant to have a transitory impact on the global economy.
It now sees the world consuming 99.13 million b/d of oil in the first three months of 2022, an increase of 1.1 million b/d from its forecast last month.
“Following OPEC’s more positive outlook, the market will look for more evidence of strong demand in the IEA’s monthly oil market outlook today,” ANZ Research analysts Brian Martin and Daniel Hynes said.
“The Saudis have shown they are masterful at controlling the energy market and whatever downward pressure emerges will likely be short-lived unless many developed nations enter full lockdown mode,” OANDA’s Moya said. “The Saudis are making sure that crude prices can only either consolidate or head higher,” he added.
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Source: Platts
