Oil fell sharply as a new Covid-19 strain raised concerns about the outlook for demand, sending global markets spiraling.
Futures in New York tumbled below $74 a barrel and benchmark Brent shed as much as 5.1%. The emergence of the new strain has seen several nations curb travel from South Africa and some neighboring countries. Global markets sold off heavily, as traders fled to haven assets.
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“With little known about it, the market is right to be panicked,” said Keshav Lohiya, founder of analytics company Oilytics. “However this is a cat-and-mouse game between vaccines and variants.”
The drop comes ahead of a key OPEC+ meeting to decide production policy for January. The group has been under pressure from the U.S. and other consuming nations, who tapped strategic stockpiles to tame rising energy prices this week. The group has also been accused of creating “artificial tightness” by the International Energy Agency.
West Texas Intermediate for January fell as much as 6.4% to $73.36 a barrel from Wednesday’s close and was at $73.87 at 9:16 a.m. London time.There was no settlement Thursday due to the Thanksgiving holiday and all transactions will be booked Friday.
Brent for January settlement tumbled as much as 5.1% to $78 a barrel on the ICE Futures Europe exchange.
The weakness Friday wasn’t just confined to headline prices. In Europe, profits from turning crude into diesel plunged to their lowest in several weeks. In the U.S., a key gauge of market tightness fell sharply.
OPEC+, which has been restoring 400,000 barrels a day of supply to the market each month, will have to consider internal projections that the reserves release will exacerbate a surplus it’s forecasting for early next year.
Those figures were released before the emergence of the latest variant.
© 2021 Bloomberg L.P.