Oil prices slide as rapid Omicron spread dims fuel demand outlook

Oil prices slumped by $3.85 on Monday as surging cases of the Omicron coronavirus variant in Europe and the US stoked investor worries that new mobility restrictions to combat its spread could hit fuel demand.

Brent crude futures fell by $3.85, or 5.2 per cent, to $69.67 a barrel by 9.40 pm ist, while US West Texas Intermediate crude futures were down $4.51, or 6.4 per cent, at $66.35.

“Simply put, it is not a case of if but when governments impose tougher restrictions,” Stephen Brennock of broker PVM said in a report.

“Both crude markers are taking a sharp dive as the new week gets underway amid the prospect of a bigger-than-expected micron-spurred dent to global demand,” he added.

The Netherlands went into lockdown on Sunday and the possibility of more Covid-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries.

US health officials urged Americans on Sunday to get booster shots, wear masks, and be careful if they travel over the winter holidays, with the Omicron variant raging across the world and set to take over as the dominant strain in the US.

Meanwhile, US energy companies this week added oil and natural gas rigs for a second week in a row.

The oil and gas rig count, an early indicator of future output, rose by three to 579 in the week to December 17, representing its highest since April 2020, energy technology company Baker Hughes said in its closely followed report on Friday.

Lower exports are expected from Russia, however, with exports and transit of oil from the country planned at 56.05 million tonnes (mt) in the first quarter of 2022 versus 58.3 mt in the fourth quarter of 2021, a quarterly export schedule seen by Reuters showed on Friday.

Meanwhile, Organization of the Petroleum Exporting Countries-plus compliance with oil production cuts stood at 117 per cent in November, up 1 per cent from the previous month, two sources from the group told Reuters, as output continues to lag agreed targets.