Oil fell for the first time in three days on concerns about the demand impact from the Omicron variant and tighter monetary policy.
Futures in New York dropped below $72 a barrel after rising 2.3 percent over the past two sessions. Daily Covid-19 cases in the UK have jumped to a record, while hospitalizations have surged across the US.
The Bank of England unexpectedly raised interest rates for the first time since the pandemic struck in a sign that inflation is now of bigger concern to leading central banks than the virus.
Signs are also emerging of softening oil demand in Asia, while the International Energy Agency said this week that the global market had returned to surplus as omicron impedes travel. The weakness is showing up in the market’s structure, with Brent momentarily flipping into a bearish contango on Tuesday.
This week has seen traders hit with conflicting signals on demand and supply, ranging from the central bank moves and new restrictions to limit the spread of Omicron to declining inventories in the US. That has seen a generally risk-off attitude in oil markets, leading the aggregate volume of futures contracts on Thursday to drop to its lowest since August.
“There is still much uncertainty stemming from Omicron,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Demand may be feeling the hit in different pockets, but does not appear to be as severe as the delta outbreak for now. Price consolidation may continue for a while.”
Prices:
West Texas Intermediate for January delivery dropped 1.1 percent to $71.61 a barrel at 12:31 p.m. Singapore time on the New York Mercantile Exchange after advancing 2.1 percent on Thursday.
Prices are little changed for the week.
Brent for February settlement lost 1 percent to $74.29 on the ICE Futures Europe exchange after adding 1.5 percent on Thursday.
The prompt timespread for Brent was 10 cents in backwardation, compared with 24 cents a week earlier.
Omicron is starting to limit the movement of people. The City of London has transformed from a raucous district with thousands of workers celebrating Christmas into a no-party zone in the space of a week. Almost half of staff didn’t go to the office on Monday, the lowest since September, according to data compiled by Google, which tracks the location of its users.
Other oil-market news:
China ramped up its buying of Iranian crude last month after independent refiners were granted extra import quotas for 2021.
Processing the high-sulfur crudes produced in the Gulf of Mexico hasn’t been this profitable since 2017, thanks to cheap shale gas.
The US is pushing European Union allies to finalize a broad package of sanctions against Russian banks and energy companies that could be imposed if Russia attacked Ukraine. Bloomberg News
