Futures in New York rose about 3.5% on Monday after advancing as much as 7% from Friday’s rout. The World Health Organization has warned that the new strain could have serious consequences. Meanwhile, officials in the Biden administration reiterated the government’s commitment to release crude from the strategic oil reserve to contain prices.
The Organization of the Petroleum Exporting Countries and its allies have moved the technical meetings to give themselves time to review the precipitous decline in oil late last week. Saudi Arabia’s Energy Minister said he was not concerned about the variant, and Russia said the group was waiting for more information. OPEC + is expected to meet later this week and decide on its production plan for January, with a pause in supply hikes possible, according to Morgan Stanley.
As OPEC and its allies assess their next steps, the United States has reiterated its commitment to free oil from reserves. “We are not reconsidering our decision,” White House press secretary Jen Psaki told reporters at a briefing on Monday.
While the fundamental driving force behind the Friday oil sale was the emergence of the omicron, at the end of the day everything from technical selling to options markets was pushing the market down. Yet analysts at Goldman Sachs Group Inc. at Energy Aspects Ltd. said the move was overblown and traders are now waiting to see the severity of the variant’s impact.
“It will take a few weeks to clearly understand how bad this new strain is,” Tariq Zahir, senior member of the global macro program at Tyche Capital Advisors LLC. “We could see the sell go into any rebound we see until we get some clarity. “
OPEC will likely take a cautious stance when it meets this week, according to Vitol Group, the world’s largest independent oil trader. Further flight cancellations are also likely this week due to the variant, said Mike Muller, head of the company for Asia.
Crude had fallen over the past month, with President Joe Biden signaling potential strategic crude in response to rising energy prices. Last Tuesday, the White House announced a release of 50 million barrels of crude in coordination with China, Japan, South Korea and the United Kingdom. if necessary.
“I think we wanted to do something that had an impact on the market and also had the ability and flexibility to allow us to do it again if the need arises for the US economy,” said Monday at CNBC Amos Hochstein, senior adviser to the US State Department. .
- WTI for January delivery rose from US $ 2.30 to US $ 70.45 per barrel at 2:20 p.m. in New York
- Brent for January settlement rose US $ 1.38 to US $ 74.10 per barrel
As a result of the crisis, the volatility of the oil market collapsed. An indicator of price movements reached its highest level since May 2020. This also accompanied an increase in trading volumes as prices retreated.
The sell didn’t just focus on the front end of the oil curve. December 2022 Brent lost nearly US $ 8 on Friday and had recovered about US $ 2.5 from that loss on Monday. The offset level – a bullish structure indicating a tight supply – in the futures curve has also fallen sharply.
Meanwhile, inventories at Cushing, Oklahoma, the delivery point for benchmark U.S. crude futures, rose about 1.72 million barrels last week, traders said citing data from Wood. Mackenzie.
- Iran has said world powers must obtain a full, guaranteed and verifiable lifting of sanctions against Tehran when they resume talks.
- Airlines, passengers and businesses have had to respond to a deluge of travel restrictions announced over the weekend to slow the spread of the omicron coronavirus variant.
- JPMorgan said oil could hit US $ 150 a barrel in 2023 due to a lack of OPEC + reserve capacity.