Surging cases of Omicron variant of COVID-19 in Europe and the United States have crashed the price of Brent, the benchmark for Nigeria’s crude by $73.
This development has fuelled worries that new mobility restrictions to combat the spread of disease could hit fuel demand.
On Monday, Brent crude futures dropped by $3.16, which represented 4.3 percent to $70.36 a barrel by 1506 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down by $3.47 which represented 4.9percent, at $67.39.
Craig Erlam, senior market analyst at OANDA, said, “Oil prices are getting pummel again as sentiment turns south and countries ponder deepening restrictions and lockdowns”.
He added, “None of this bodes well for crude demand in the first quarter of the year”.
Recall, the International Energy Association (IEA) cut its 2022 supply forecast from non-OPEC producers by 100,000 barrels per day and cut its demand forecast by the same amount, citing a surge in coronavirus cases as a reason for the slowing of global demand recovery.
In the same vein, the IEA reported last week in its Oil Market Report that global oil demand is expected to rise by 5.4 million barrels per day in 2021 and 3.3 million barrels per day in 2022 to reach pre-pandemic levels of 99.5 million barrels per day globally.
Read also: Oil prices dip towards $73 as IEA expects Omicron to dent global demand
However, the recovery is expected to be hampered by a new surge in COVID-19 cases, with jet fuel bearing the brunt of the damage, according to the report. Its authors noted that the emergence of the new Omicron variant had already resulted in new international travel restrictions.
The IEA added, however, that while the increase in new COVID-19 cases was expected to slow demand, the already underway recovery was not expected to be completely derailed.
Despite this uncertainty, production is expected to outpace demand in December, led by increased output from the United States and OPEC+ countries, according to the report. This upward trend would extend into 2022, the IEA said, with the U.S., Canada and Brazil set to pump at their highest annual levels ever.
Similarly, OPEC+ predicted that the Omicron variant would have a mild impact on oil markets, and said it expects demand to reach 100 million barrels per day by the third quarter of 2022. It also raised its demand forecast for the first quarter of 2022 by 1.1 million barrels per day.
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