Oil markets took a bullish stance in the Asian session as investors look for bargains after Friday’s sell-off and on speculation that the Organization of Petroleum Exporting Countries and its allies may pause an output increase in response to the spread of Omicron. But the mood however, remained cautious with little known about the new variant.
The global benchmark, the Brent crude futures is bullish by 3.58%, to currently trade $74.15 a barrel. This comes after losing 11.32% on Friday. The United States’ benchmark, the West Texas Intermediate (WTI) crude is up 4.27%, currently trading $71.06 a barrel.
This comes after falling below the $70 trading zone, having lost 13.04% in the previous session. Friday’s decline represents the benchmark’s biggest one-day drop since April 2020.
What you should know
There are still worries that the new variant could derail the global economic recovery, potentially hurting oil demand, while it has also added to concerns that a supply surplus could swell in the first quarter.
Also, over the weekend, the new variant was seen to be spreading all around the world as new cases have been found in the Netherlands, Denmark and Australia despite rapid travel restrictions imposed on Friday.
However, the World Health Organization (WHO) explained that it was not yet clear whether or not the Omicron strain is more transmissible or dangerous than other variants. The top U.S. infectious disease official, Dr. Anthony Fauci, told President Joe Biden on Sunday that it will take about two weeks to have definitive information on the Omicron.
OPEC’s joint ministerial monitoring committee was delayed from Tuesday to Thursday. OPEC+ will also meet on Thursday, when a policy decision will likely be announced on whether to adjust its plan to increase output by 400,000 barrels per day in January and beyond.
What they are saying
Some analysts have suggested the group could pause the increases after the release of stocks by oil-consuming countries and possible repercussions for demand from new lockdowns to contain the new variant.
Nissan Securities general manager of research Hiroyuki Kikukawa told Reuters that, “There was correction buying on views that the oil market had been oversold last week and on speculations that OPEC+ may take a measure against omicron, potentially cutting output. All eyes will be on how omicron will affect global economy and fuel demand, Organization of the Petroleum Exporting Countries and its allies (OPEC+) action and Iran nuclear talks this week.”
Tatsufumi Okoshi, senior economist at Nomura Securities stated, “We saw some correction as the Friday’s plunge in oil prices has been overdone. If the market falls further, OPEC+ may pause the planned increase of crude production to support prices.”
Talks on reviving the 2015 Iran nuclear deal are to resume in Vienna today, with Iran’s atomic advances raising doubt as to whether a breakthrough can be made to bring Tehran and the United States back into full compliance with the accord.