Oil: Losses of more than 11% as new mutation raises concerns about international demand

Oil prices plunged more than 11% on Friday, falling to an 11-week low as a new coronavirus mutation – found in South Africa and named by the WHO as Omicron – sparked fears of a slowdown in demand as supply is increasing.

In particular, the WTI January delivery It sank 13.1% or $ 10.24 to close at $ 68.15 a barrel, its worst daily performance since April 20, 2020, according to Dow Jones Market data. US crude has fallen more than $ 15 from its October high of $ 85.41.

Alongside, Brent delivery January fell 11.6%, or $ 9.50, to close at $ 72.72 a barrel, the biggest daily drop since April 21, 2021.

Both US crude and Brent closed at 9 September.

On a weekly basis, the WTI fell 10.42% and Brent slipped 7.58%. Both contracts recorded the fifth consecutive week of losses, marking the largest weekly loss series since March 2020.

The oil slump came in the wake of the discovery of a new variant of the coronavirus with a high level of mutations in South Africa, which has seen a sharp rise in cases in recent days.

The mutation, formerly known as B.1.1.539, was also detected in Botswana and in Hong Kong travelers visiting South Africa, and a case was detected in Europe and especially in Belgium.

In addition, the 27 Member States of the European Union have agreed to temporary suspension of flights to and from countries in southern Africa, as a precautionary measure against the new coronavirus mutation, first detected in Botswana, the Slovenian EU Presidency announced on Friday afternoon.

Meanwhile, declining travel and potential new lockdowns, which could affect demand, come at a time when supply is set to rise.

It is recalled that on Tuesday, the US announced plans to release 50 million barrels of oil from strategic reserves. Meanwhile, India, China, Japan, South Korea and the United Kingdom will also release some of their strategic reserves.

The fall in prices also took place in view of the OPEC + meeting next week. Following the coordinated release of strategic stocks from the US and other countries earlier this week, the potential seriousness of the new mutation is another serious factor that OPEC + will have to consider in deciding whether to increase production.

“OPEC + has repeatedly stated that one area of ​​focus has been the resurgence of the virus, which is hurting oil demand as the group increases production,” said Jeffrey Halley, an OANDA analyst.

He added that OPEC + is unlikely to increase production above the previously agreed target of 400,000 barrels per day last week, “unless the market situation really worsens next week”.