Global oil prices extended declines Tuesday, taking U.S. crude to the lowest levels since September, as investors bet the Omicron variant will slow economic growth and hammer energy demand over the coming months.
Moderna's (MRNA) - Get Moderna, Inc. Report warning that its Covid vaccine may experience a 'material drop' in efficacy against the Omicron variant -- a view echoed by Regeneron with respect to its antibody cocktail -- has pounded global markets again Tuesday and pulled crude prices sharply lower.
The declines come, curiously, against a series of headlines that would normally boost crude prices, including a warning from Italy's energy minister of potential winter power blackouts owing to surging natural gas prices and the specter of a pullback in production increases from OPEC leaders -- as well as non-member allies such as Russia -- ahead of their delayed December meeting later this week.
"The uncertainty of this latest variant will also make the job of OPEC+ more difficult. The group has already delayed its Joint Ministerial Monitoring Committee and Joint Technical Committee meeting to later in the week, in the hope that more information with regards to Omicron would become available," said ING's head of commodity strategy Warren Patterson. "The full ministerial meeting will go ahead as planned on Thursday ... we would not rule out the group pausing its supply increases over January."
WTI futures for January delivery were marked 4.7% lower on the session at $67.05 per barrel while Brent crude contracts for the same month fell $2.65 to $70.80 per barrel, setting up the worst monthly decline for the global benchmark since March of 2020.
WTI, in fact, is now 20% lower than its October 26 peak, and some 15% from the levels it reached prior to President Joe Biden's decision to release 50 million barrels of crude from the Strategic Petroleum Reserve.
OPEC cut is 2021 demand forecast earlier this month by 330,000 barrels per day -- a figure that nearly matches the 400,000 barrels it has committed in increased production -- arguing that surging COVID infection rates in Europe will slow industrial purchases and rising share production in the United States will ultimately boost global supplies.
Prices might also be pressured by the resumption of nuclear talks between the European Union and Iran, which could, over the medium-term, lead to the dropping of sanctions on crude exports, estimated at around 2.5 million barrels per day.
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