Omicron Shadow Looms Over Oil, Gas Prices

Omicron may end up deciding how much you will spend on your auto and cooking fuel. Not only has it put health experts and bodies like the WHO in a cautious mode as they are working on how dangerous or destructive this virus is, it has also left entities such as the Organization of the Petroleum Exporting Countries (OPEC) confused.

It is going to be a critical 10 days for the market till a clarity emerges regarding the latest virus variant, as experts tracking the sector are of the view that the situation is still “evolving” and a lot will depend on the way Europe and the US shape up over the next two weeks. “Commodity prices, including that of oil and natural gas, are likely to firm up on the back of an anticipated peak demand requirement in winter and low inventory levels. However, the exact impact on prices can only be determined once there is a prognosis on how dangerous the Omicron variant turns out to be,” said an expert.

The recent emergence of the Omicron variant has been posing a threat sparking a risk-off trade in many markets, including commodities. In effect, the Brent crude had fallen from levels of $80 a barrel as of November 25 to $70 a barrel at present.

Price stability: Another global lockdown?

“We believe the market was overbought when prices soared above $80/bbl, driven largely by sentiment, and the current $10/bbl fall is a reflection of that. Where prices stabilise will depend on the prognosis of how dangerous the Omicron variant turns out to be. At this point, we simply do not know – it could lead to another round of global lockdowns, or it could be so mild that no further measures are needed,” said Yaw Yan Chong, Director, Refinitiv Oil Research (Asia), in the report.