Oil prices fall on fears of Omicron impact, slow growth
05:29, 10 December 2021
Oil prices extended losses on Friday weighed by concerns about Omicron’s impact on energy demand and the outcome from the US Federal Reserve’s meeting next week.
International benchmark Brent crude oil futures dropped 0.13% to $74.32 per barrel on Friday, while West Texas Intermediate (WTI) fell 0.28% to $70.74/bbl.
“There are many negative factors that pressure oil prices for the short-term, but the main one is the fear of Covid-19’s Omicron,” said Lukman Leong, an analyst at the Jakarta-based Deu Calion Futures to Capital.com
“UK has announced new Covid-19 restrictions. Markets expect Germany to follow and other countries,” Leong added.
Al Jazeera reported that British Prime Minister Boris Johnson announced measures to tackle the spread of Omicron, including work-from-home orders, wearing masks in public places and the use of vaccine passes.
Markets also have their eyes on the US Federal Reserve’s meeting next week for signs of tightening economic policy from the US, Lukman said.
ING Group in a note on Friday said that downgrading of two Chinese property developers to restricted default by Fitch Ratings would not have helped sentiment for the oil market either.
Fitch Ratings on Thursday downgraded ratings for Chinese real estate developers Evergrande and Kaisa after the companies defaulted on foreign debts. This has mounted doubts about China’s economic growth.
Iran nuclear talks
Despite a slew of bearish factors, a potential stalemate in talks over the possible resumption of the 2015 nuclear deal between Iran and world power nations offered support to the oil market.
Reuters reported on Thursday that the Iran nuclear talks resumed in Vienna with the United States and Israel ramping up rhetorical pressure on Tehran about the possible economic or military consequences if diplomacy fails. Iran demands all sanctions imposed by the US in 2018 to be lifted in a verifiable process.
“There are no results so far from the talk and that’s positive for oil prices,” said Lukman.
If the sanctions on Iran were lifted, the country would be able to resume oil exports, potentially increasing supply in the market.