In Asia on Tuesday morning, oil was up, continuing its comeback from the previous week’s drop. Due to the uncertainties surrounding the new Omicron coronavirus type, investors continue to believe that large producers will hold off on expanding the oil supply.
By 11:28 p.m. ET, Brent oil futures had risen 0.64 percent to $73.69, while WTI futures had risen 1.03 percent to $70.67. Last Friday, oil fell by approximately 12% on fears that the omicron variant would lead to more lockdowns and lower fuel demand.
Increased supply from US-based oil producers might help lower oil prices, but the number of US oil rigs is around half of what it was in 2019, and investments back into the sector have been delayed since oil prices briefly fell below zero during the outbreak in 2020.
Omicron poses a very high risk of infection surges, according to the World Health Organization, which has designated it as a “variant of concern.” Over the weekend, several nations, including the Netherlands, Denmark, and Australia, reported omicron instances, while other countries have imposed travel restrictions.
Due to the uncertainty around the fuel demand outlook as a result of omicron, investors are now expecting OPEC+ to postpone plans to increase 400,000 barrels per day of supply in January. That’s a recipe for higher oil prices, at least until US oil production reaches pre-pandemic levels.
Oil prices are primarily influenced by supply and demand. While the Omicron COVID-19 variation dragged down oil prices on Friday, with investors anticipating that future country lockdowns would decrease travel and, as a result, dampen demand for oil, JPMorgan saw that as an overreaction.
With demand for oil expected to stay stable, supply will continue to be the primary driver of oil prices for many years to come. With OPEC+ firmly in control of oil prices, economists predict Brent will approach $125 per barrel in 2022.