The Covid strains are providing a series of diminishing impacts: File image/Pixabay
The rapidly deflating omicron fear bubble continued to bode well for oil prices on Tuesday, and despite perceived overreaction by some world governments to the latest Covid strain, traders felt more confident about continued demand recovery overall.
West Texas Intermediate settled up $2.56 at $72.05 per barrel, while Brent settled up $2.36 at $75.44 per barrel, helping make true Citigroup Inc.'s prediction on Tuesday that the market should recover from recent major losses.
Citi analysts including Ed Morse wrote in a research note: "It is too early to make any solid forecast on the impact of the omicron strain, but we note that each new wave of infections impacted global oil demand by half the previous wave."
Ed Morse, head of commodities research, Citigroup Inc.
Each new wave of infections impacted global oil demand by half the previous wave
China added to the bullish sentiment with reports that oil imports rose to a three-month high in November and exports hit a record; plus, U.S. crude exports to China in October surged to the highest level since May.
Even though omicron – and news media fear mongering - began surging in late November, OAG reported on Tuesday that airline seat capacity globally has barely budged, dropping only 0.5 percent in the week through December 6 versus the previous seven days.
Plus, Japan's flight capacity rose 3 percent in the week to Monday, while seat capacity in India and Australia this week were up 0.8 percent and 13.7 percent respectively; as for Qantas Airways Ltd., its chief executive Alan Joyce on Tuesday said it expects to reach more than 115 percent of pre-COVID domestic capacity levels by April as Australian state borders open.
Also, in the variant's epicenter of South Africa, flight bookings haven't taken a further hit and road use has remained steady.
Amrita Sen, chief oil analyst at consultant Energy Aspects, said, "The critical thing is going to be how much more travel restrictions are we going to get in the next couple of weeks: there's lots of pent up demand."