Oil prices recovered around 3% this Monday as fears of the Omicron variant causing severe demand disruption in the market are fading away. According to Reuters, the rally on oil prices happened despite several flight cancellations in the US due to Covid-19 restrictions.
Firstly, Brent crude rose $2.55, or 3.4%, to settle at $78.69 a barrel by 12:27 pm this Monday. While the US mix, the West Texas Intermediate, rose $1.85, or 2.5%, to $75.64 a barrel. The U.S. market was closed on Friday for a holiday.
Moreover, this recovery represents a gain from a deep plunging. Crude oil lost more than 10% on November 26, when reports of a new variant from the Covid-19 appeared. However, data suggests that this variant, the Omicron, causes milder levels of illness.
Leona Liu, analyst at Singapore-based DailyFX, said about the matter. “Though Omicron is spreading faster than any COVID-19 variant yet, a relatively relieving news is that most people infected with Omicron are showing mild symptoms, at least so far.”
In addition, Britain’s government will not introduce new COVID-19 restrictions for England before the end of 2021, its health minister, Sajid Javid, said on Monday.
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Factors at play for oil prices performance in 2022
However, in the US more than 1300 flights were cancelled on Sunday due to Covid-19. Airlines had reduced personnel and were operating with limited crews. Also, several cruise ships had also to cancel stops.
Furthermore, Jeffrey Halley, analyst at brokerage OANDA, said to Reuters. “The disruption to goods and services from isolating workers, notably air travel, seems to be the main fallout so far.” He also remarked. “That is only likely to cause short-term nerves, with the global recovery story for 2022 still on track.”
On the other hand, this Monday talks resume between the western world and Iran on reviving its 2015 nuclear deal. Iran said oil exports were the focus of the talks, which so far appear to have made little progress on boosting Iran’s shipments.
Also on investors’ radar is the next OPEC+ meeting on Jan. 4, at which the producer alliance will decide whether to go ahead with a planned 400,000 barrels-per-day (bpd) production increase in February.
Finally, these factors will be vital for the performance of oil prices on 2022. Specially if OPEC+ sticks with its plant to boost output for January despite Omicron.