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Wednesday, Jan 26, 2022

Oil Dips After Swing on U.K. Omicron Death, Saudi Demand Reassurance

Oil Dips After Swing on U.K. Omicron Death, Saudi Demand Reassurance

Crude prices fell as much as 1% on Monday after swinging on reports of U.K.’s first death from the Omicron variant of Covid and Saudi Energy Minister Abdulaziz bin Salman’s bid to instill confidence in demand for oil.
British Prime Minister Boris Johnson announced on Monday that at least one person has died in the United Kingdom after contracting the Omicron variant of the coronavirus.

Last week, Johnson asked the public to work from home if possible and to wear masks on public transport, and then on Sunday he urged the country to get booster shots to prevent the health service from being overwhelmed, warning that a “tidal wave” of cases was approaching.

The World Health Organization, meanwhile, said on Monday that Omicron poses a "very high" global risk, with evidence that it evades vaccine protection, although clinical data on its severity was limited.

Crude prices, which rallied more than 2% earlier on Monday, extending last week’s gain of around 8%, slumped on news about the first U.K. fatality from the variant and the WHO’s caution.

They, however, came off their lows on long-term forecasts for oil demand from the Saudi energy minister.

Oil will account for 28% of energy demand until at least 2045, up from 30% in 2020, Abdulaziz said.

Reduced exploration and drilling investments could cut oil production by 30 million barrels by 2030, he added.

West Texas Intermediate, the benchmark for U.S. crude, settled down 38 cents, or 0.5%, at $71.29 a barrel, after oscillating between a session peak of $73 and low of $70.56. WTI gained 8.1% last week. Prior to that, it hit a four-month low of $62.48 on Omicron-related fears, after a seven-year high of $85.41 in mid-October.

London-traded Brent, the global benchmark for oil, settled down 76 cents, or 1%, at $74.39, after a high of $76.38 and bottom of $74.21. Brent rose 7.7% last week. Prior to that, it fell to a four-month low of $65.80, from a 2014 high of $86.70 in mid-October.

“Ultimately, the price will only hold up as long as investors continue to believe Omicron poses no substantial threat,” said Craig Erlam, analyst at online trading platform OANDA.

“Leaders appear more concerned than investors at the moment which is always a worry,” said Erlam. “With oil prices 15% off their October highs, there does appear to be some caution priced in at these levels.”

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