Americas News
Oil Drops On Government Lockdown Fears Despite Reports Questioning Omicron's Severity
Despite numerous reports showing that omicron's impact is far less severe than that of the delta variant, crude traders on Thursday continued to fear the worst: that already panicky governments will revive lockdowns and ruin demand recovery – and as a result, oil prices dropped.
After rebounding in the wake of a six-week decline, West Texas Intermediate on Thursday fell $1.42 to settle at $70.94 per barrel; Brent dropped $1.40 to settle at $74.42 per barrel.
Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said that although traders initially priced in the worst-case scenario for omicron, they "underestimated" how governments would respond to its contagiousness.
"The market is still in calibration mode around the virus," she said.
Indeed, this time out world governments are increasingly being perceived as overreacting to Covid at the expense of economies, especially with disclosures that a third dose of the Pfizer Inc. and BioNTech SE vaccine can neutralize the variant (not to mention that hospitalization rates even among the unvaccinated are relatively low).
Carsten Fritsch, an analyst at Commerzbank, remarked, "Nonetheless, omicron is causing renewed restrictions on public life to be imposed in additional countries."
Also partly related to omicron, ICE Futures Europe data on Thursday showed that total open interest in diesel contracts in Europe has plummeted by more than a third since the start of October to its lowest since 2015, or the futures-market equivalent of almost 250 million barrels closed.
Meanwhile, despite global oil demand having roared back in 2021 overall, Bloomberg on Thursday noted that EV sales are on a tear, with more than 1.7 million sold in the last quarter (over 935,000 of which sold in Asia).
However, the news agency added that given the quality of today's new cars, demand for oil won't likely peak until between 2025 and 2035.
Also on Thursday, a report issued by the Canada Energy Regulator showed that output at the world's fourth-largest oil producer will climb to 5.8 million barrels per day (bpd) by 2032 from 5 million this year, and then decline to 4.8 million bpd in 2050.
The projections were based on countries continuing to fight climate change, which will supposedly contribute to inflation-adjusted Brent crude falling to $40 per barrel by 2050.
