Oil rebounded from one of its biggest ever daily drops as traders assessed the risks to global demand from the Omicron variant of COVID-19 and the potential response by OPEC and its allies.
Brent for January settlement rose 4.1 per cent to US$75.67/bbl at 10:33 a.m. in London. Earlier on Monday, prices rose as much as 5.2 per cent in intraday trade after ending 11.6 per cent lower on Friday.
WTI for January delivery climbed 4.6% to $71.28/bbl.
The World Health Organization warned the new strain could have severe consequences, while South Africa has said it appears to be more infectious, but with mild symptoms.
OPEC and its allies have already moved technical meetings in order to give themselves time to review the rout on Friday. The group is scheduled to gather later this week and decide on its output plan for January, with a pause in supply hikes on the cards, according to Morgan Stanley.
Still, analysts from Goldman Sachs to Energy Aspects said that Friday’s selloff was overdone and traders are now waiting to see how severe the variant’s impact will be.
“Clearly there are fears that this could have a considerable impact on demand,” said Carsten Fritsch an analyst at Commerzbank AG. “That said, Friday’s price slide was excessive.”
OPEC+ will discuss the market situation and any relevant necessary steps, Russia’s Deputy Prime Minister Alexander Novak said Monday. The group postponed a ministerial meeting to get more information about current events, including the new COVID strain, he said.
OPEC will likely take a cautious stance when it gathers this week, according to Vitol Group, the world’s biggest independent oil trader. There’s also set to be more flight cancellations this week as a result of the variant, Mike Muller, the company’s head of Asia said.
© 2021 Bloomberg L.P.