Omicron unlikely to weigh on oil demand and economic activity
Oil prices are expected to maintain a steady upward trend this year as Omicron is unlikely to cause a massive drop in demand for crude, while supply concerns will support prices in the near term, according to forecasts. experts.
Crude prices, which have gained almost 60% in 2021, edged higher in the first week of trading this year. Global benchmarks Brent and WTI posted gains of more than 5% in the first week of the year, with prices at their highest level since late November, as supply concerns rose above expectations. concerns that the rapid spread of the Omicron coronavirus variant could hurt demand.
US benchmark West Texas Intermediate (WTI) crude oil for February ended at $78.90 a barrel while Brent crude for March delivery closed at $81.75 a barrel on Friday. Previously, Brent crude hit $82.01 and WTI traded at $79.29 a barrel.
“Oil prices rose after unrest in Kazakhstan threatened oil supplies. The country is home to major crude oil extraction and transportation facilities and investors are concerned that social unrest will affect actual production and delivery capacity,” said Wael Makarem, senior market strategist for the Mena region. at Exness, Khaleej Times.
Vijay Valecha, Chief Investment Officer, Century Financial on Global Markets, said oil prices posted weekly gains for the third straight time.
“With current weekly gains of over 5%, benchmarks are rapidly approaching their October highs. The current strength in energy prices can largely be attributed to the global rhetoric of tighter supply. reports of supply disruptions in North America and Kazakhstan have brought attention back to tight supply,” he said.
He said much of Western Canada had been in the midst of a deep freeze for two weeks.
“Due to extremely cold conditions, oil production from the Bakken field in the United States and North Dakota has also been crippled. Kazakhstan is currently in immense turmoil as political protests damage the global economic scenario. Saudi Arabia slashed prices of all grades of rough it will sell to Asia in February to the lowest premium seen in the past three months. This is due to rising Opec+ supplies and fears of further Omicron spread. Support for WTI and Brent is estimated at $77 and $80, respectively. On the upside, resistance is seen at $81.50 and $84, respectively,” Valecha told the Khaleej Times.
High prices for 3 years
The annual average of $71 per barrel of Brent in 2021 is the highest in the last three years. The price of WTI crude oil followed a similar trend to Brent and averaged $3 per barrel lower than Brent in 2021. The spot price of Brent crude oil started the year at $50 per barrel and peaked at $86 a barrel in late October before declining in the final weeks of the year.
Dayanand Mittal, oil and gas analyst at JM Financial Institutional Securities, said oil prices should normalize after March and April.
“Near-term oil prices are expected to remain supportive, but in the medium to long term, prices are expected to moderate,” Mittal said.
Rystad Energy analyst Louise Dickson said the rise in oil prices mainly reflects market jitters as unrest escalates in Kazakhstan and the political situation in Libya continues to deteriorate and tarnish. oil production gap.
Omicron’s worry lessens
Experts said the latest Covid variant, Omicron, is unlikely to negatively impact crude oil demand and economic activity.
“Concerns about a massive drop in oil demand have faded now that it has become clear that Omicron leads to milder forms of the disease than previous variants of the virus, which means that massive mobility restrictions are not likely,” said Commerzbank analyst Carsten Fritsch.
Meanwhile, supply additions from the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies – collectively called OPEC+ – are not keeping up with demand growth.
OPEC’s December production rose 70,000 barrels per day from the previous month, compared with the 253,000 bpd increase allowed under the Opec+ supply deal that restored reduced production in 2020 when demand collapsed under Covid-19 lockdowns.
Production in Libya fell to 729,000 barrels a day from a peak of 1.3 million bpd last year, partly due to pipeline maintenance.
Source: Khaleej Times