Oil prices drop more than 10% as virus variant threatens to strike demand – .

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Oil prices drop more than 10% as virus variant threatens to strike demand – .


Oil prices plunged more than 10% on Friday, as reports of a virulent new variant of the coronavirus raised fears of more pandemic lockdowns and another blow to fuel demand, as did the United States plan to release more supplies into the market.

West Texas Intermediate, the US oil benchmark, fell 13% to $ 68.15 a barrel as US traders returned after the Thanksgiving holiday. The international benchmark Brent fell 12% to $ 72.72 a barrel.

Both oil markers saw their biggest day-long declines since the price of WTI briefly turned negative in April 2020 at the height of the pandemic.

The price drop came days after the White House, concerned about soaring oil prices and widespread inflation, announced it would release 50 million barrels of crude from its strategic oil reserve over the next few months. months – the largest oil draw ever taken from government stocks. – in conjunction with additional contributions from five other countries.

Tuesday’s US announcement had little immediate effect on prices. But news of the Sars-Cov-2 B.1.1.529 variant, first identified in Botswana, has now overwhelmed feelings.

“It obviously remains a widely open question whether this new variant will really pose a material threat to oil demand, with vaccination rates rising sharply since the summer,” said Rory Johnston, Managing Director of Price Street, a research group. “But the markets aren’t waiting to find out. Sell ​​now, ask questions later.

Last year’s lockdowns reduced global demand by up to 20% during the worst phase. But the easing of restrictions, cuts in supply by the Opec + alliance to producer countries, and heavy government stimulus spending have since sparked a rebound in oil prices, which have doubled since news of the vaccine’s breakthroughs was announced. the coronavirus last November.

Other analysts have said the sudden drop in oil prices could force Opec + to halt planned supply additions – which reversed cuts made last year – at its meeting next week.

The drop in oil prices reflects “fears that the new variant could lead to widespread travel restrictions and lower demand for oil,” said Neil Shearing of Capital Economics. “OPEC is expected to meet next week and these demand issues could cause them to delay or stop their planned incremental increase in supply. “

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Opec + analysts have already predicted that the oil market will switch to a surplus in the first months of 2022 – and the surplus could increase by 1.1 million barrels per day in January and February if the United States and other countries inject 66 million barrels of oil. on the market through the planned release of their stocks.

Friday’s sale would reinforce the reluctance of Opec + leader Saudi Arabia to add too much supply, analysts said.

“The oil market is naturally sensitive to news about new [coronavirus] variations, especially given the experience of 2020 and the soaring oil prices have already seen, ”said Martijn Rats, chief commodities strategist at Morgan Stanley.

But data indicating increasing mobility outside of Europe, OPEC’s supply restriction and low production spending by oil companies will remain supporting forces once the market finds its footing, a he declared.

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