Americas News
Oil Prices Rebound Somewhat After "Overdone" Friday Route
With scientists stating the potency of the omicron variant may be not much to fear but politicians and news media suggesting otherwise, crude traders on Monday assessed the situation – and closed futures up 2.6 percent, compensating somewhat for Friday's panic-induced rout.
Analysts, including those from Goldman Sachs Group and Energy Aspects, said Friday's sell-off was overdone; Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors, echoed their sentiments by remarking, "It will take a couple of weeks to get a clear understanding how bad this new strain is; we could see selling come into any bounce we see until we get clarity."
Still, Monday's upswing only dented the calamitous trading of Friday, which saw Brent losing almost $8, and the level of backwardation - a bullish structure indicating tight supply - in the futures curve also falling sharply.
Presumably contributing to skittish traders' fears was news from Wood Mackenzie that West Texas Intermediate inventories at Cushing, Oklahoma rose by about 1.72 million barrels last week.
For his part, Amin Nasser, CEO of Saudi Aramco, remains bullish on oil despite the hoopla over omicron: he told media on Monday, "We're very optimistic about demand: we're seeing a good response from the markets, especially in Asia."
Nasser reiterated that demand should rebound to more than 100 million barrels per day (bpd), about the same consumption before the pandemic.
Meanwhile, U.S. president Joe Biden said omicron was a source of concern but not panic and that he would not impose any more lockdowns; he also said his country would proceed with its plan to release 50 million barrels of oil from its strategic reserves in order to relieve prices at the pump.
The reason for optimism in the wake of omicron was summarized by Raphael Bostic, president of Atlanta Fed, who on Monday pointed out that, "With each successive variant that's been introduced, the economy has slowed down, but the amount of slowdown has been less."
Also, according to virologist Marc van Ranst of South Africa where the omicron variant was first detected, "If the omicron variant is less pathogenic but with greater infectivity, allowing Omicron to replace Delta, this would be very positive," because it would change the lethality of Covid to that of the common flu.
