CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Omicron may slow jet fuel demand recovery until end of March

By Fitri Wulandari

08:33, 17 December 2021

An airplane is parking in an airport's tarmac for refuelling
Wood Mackenzie predicts a limited impact on gasoline and diesel demand – Photo: Shutterstock

The main impact of the coronavirus Omicron variant on the oil market would be concentrated at end of the fourth quarter of 2021 and the first quarter of 2022 when jet fuel demand is expected to be the most hit.

“Many countries have banned flights from specific African countries, and/or have instituted quarantine measures for arriving travellers due to the emergence of Omicron Covid-19 variant,” said Yitian Lian, research associate at consulting firm Wood Mackenzie, in an email to answer Capital.com’s questions.

This will slow jet fuel demand recovery which was initially seen in the late third quarter or early fourth quarter of this year as many countries were opening their borders to international travellers.

Fast spreading

Director-General of World Health Organisation (WHO) Tedros Adhanom Ghebreyesus on Tuesday said Omicron, which was first detected in South Africa, has now spread to 77 countries. The UK has recorded one death due to the variant.

Wood Mackenzie, however, forecasts that Omicron impact on gasoline and diesel demand will be more limited.

“In light of the emergence of the Omicron variant, most countries around the world are currently focusing on rolling out booster jabs instead of movement restrictions. We believe countries will be reluctant to impose movement restrictions unless there is a surge in the number of cases,” Yitian Lian added.

With that, the firm has revised down global liquids demand to 420,000 barrels per day (bpd) with 300,000bpd of this revision related to jet fuel.

Natural Gas

2.93 Price
-0.480% 1D Chg, %
Long position overnight fee -0.1700%
Short position overnight fee 0.1481%
Overnight fee time 22:00 (UTC)
Spread 0.0050

Silver

24.63 Price
-0.140% 1D Chg, %
Long position overnight fee -0.0195%
Short position overnight fee 0.0113%
Overnight fee time 22:00 (UTC)
Spread 0.020

Oil - Crude

74.88 Price
-0.280% 1D Chg, %
Long position overnight fee -0.0211%
Short position overnight fee -0.0008%
Overnight fee time 22:00 (UTC)
Spread 0.040

Oil - Brent

79.86 Price
-0.260% 1D Chg, %
Long position overnight fee -0.0103%
Short position overnight fee -0.0116%
Overnight fee time 22:00 (UTC)
Spread 0.045

Asia to lead oil demand recovery

The International Energy Agency (IEA) also revised down its global oil demand forecast for 2021 and 2022 by 100,000bpd on an average, as new international travel restrictions related to Omicron is expected to reduce jet fuel use. The agency forecast global demand to grow by 5.4 million bpd in 2021 and a further 3.3 million bpd in 2022.

Oil demand in Asia is expected to continue next year with its growth forecast at 5.5% in 2022, after rising by almost 7% in 2021, said Yanting Zhou, Wood Mackenzie’s head of APAC Economics, in a separate email. Asia is forecast to lead the global oil demand recovery in 2022.

“Based on this, refining margins are expected to recover further, providing some much-needed respite for the region’s refiners over the next 12 months,” she added.

She warned that a combination of the Omicron variant and inflationary pressures could slow or even reverse the expected recovery in oil demand.

Emission tax

“If Omicron proves to be severe, then fresh restrictions on travel could last beyond the first quarter and threaten the revival outlook,” she added.

These risks come as Asian refiners were under rising pressure from shareholders and governments to reduce their emissions. She added that if the threat of a tax on refinery emissions became real in 2022, it could lead to more refinery closures in Asia.

Read more: Oil prices retreats on lower travel expectations due to Omicron

Related topics

Rate this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading