Investor concerns about demand prompted a drop in oil prices on Tuesday, as further limitations were imposed in Europe and Asia in response to an increase in coronavirus cases.
Brent crude oil prices were down 34 cents, or 0.5 percent, to $74.05 a barrel at 0401 GMT, while WTI crude futures were down 35 cents, or 0.5 percent, to $70.94.
“Energy markets don’t want to gamble against OPEC+,” experts say, “but all of the short-term threats from Omicron to Fed tightening are proving to be quite disruptive to the short-term outlook for oil prices.”
“The virus’s spread across Europe is taking a higher toll than expected, and when you include in holiday family gatherings, the short-term forecast could be reduced over the next month,” said a senior expert.
To combat the spread of the Omicron variety, governments all around the world, including the United Kingdom and Norway, have tightened restrictions.
The Organization of Petroleum Exporting Countries (OPEC) upped its world oil demand forecast for the first quarter of 2022. Still, it kept its full-year growth forecast unchanged on Monday, claiming that the Omicron form would have a negligible influence as the world adjusts to the epidemic.
On January 4, OPEC and its allies, known as OPEC+, will meet to deliberate on their output policy. Meanwhile, supply is likely to rise, with output from the most significant U.S. shale basin expected to hit a new high in January, according to a monthly projection released by the U.S. Energy Information Administration on Monday.
The Asian Development Bank lowered its growth predictions for developing Asia for this year and next year on Tuesday, citing the risks and uncertainty posed by the Omicron coronavirus strain, which might also stifle oil demand.
Despite this, the Organization of Petroleum Exporting Countries (OPEC) raised its global oil demand forecast for the first quarter of 2022. Furthermore, it maintained its timeline for returning to pre-pandemic levels of oil consumption, claiming that the Omicron coronavirus variant would have a minor and brief impact.