Traders Brush Off Initial Omicron Panic

Traders Brush Off Initial Omicron Panic
Traders brushed off the initial panic over the Omicron variant.

Traders brushed off the initial panic over the Omicron variant on Monday, according to Rystad Energy’s senior oil markets analyst Louise Dickson.

The Rystad representative outlined that prices corrected upwards as the symptoms of the new strain of Covid-19 seem to be milder than what the market reaction last week initially indicated.

“The oil market seems to now be convinced that higher price levels are warranted and premiums are added to the bargains of last week,” Dickson said in a statement sent to Rigzone on Monday.

“Last week’s buyers are set for a good end of the year after the quick boost oil prices got, while risk offloaders are now licking their wounds,” Dickson added.

Saudi Aramco also paved the way for Monday’s oil price rise, as over the weekend it increased official selling prices for January, Dickson noted. 

“The price bump signals a clear physical demand bump in Asia for the most voluminous, about five million barrels per day produced currently, of all the OPEC+ crude grades, Arab Light,” Dickson said.

“The signal from Saudi Arabia will be passed down to traders, who always carefully note the OSPs from Aramco to price their own portfolios towards the opposite direction,” Dickson added.

“The Saudis are notably bullish about the oil demand recovery, which also showed during last week’s OPEC+ meeting, and their stance weighed on the alliance’s decision to stay the course and stick to the plan to raise output in January 2022,” Dickson continued.

Dickson warned that Rystad’s real-time data this week registered the biggest weekly demand drop in countries facing large Covid-19 case loads – with demand for road fuels in Russia and India both dropping by more than 60,000 barrels per day since last week. However, the Rystad representative also noted that road fuels demand in the U.S. in the last week jumped by 60,000 barrels per day, “as despite the worsening Covid-19 situation, vaccinations are more widely distributed and third booster shots delivered”.

Global weekly Covid-19 cases dropped last week for the first time since October after six consecutive weeks of increases, according to the latest information from the World Health Organization (WHO). Global weekly Covid-19 deaths rose by 5.72 percent last week, after a 9.16 percent drop the previous week, WHO data showed.

As of December 6, 7:34pm CET, there have been 265.1 million confirmed cases of Covid-19, with 5.2 million deaths, WHO figures outline. A total of 7.9 billion vaccine doses have been administered as of December 6, according to WHO data.

At the time of writing, the price of Brent crude oil stood a $74.40 per barrel. Prices closed above $86 per barrel in October.

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