Oil prices slide toward weekly loss as COVID-19 uncertainty weighs

LONDON: Oil prices slid on Friday, heading for a slight decline over the week, on concern curbs to slow the spread of the omicron COVID-19 variant could hit demand.

Brent crude futures declined 1.5 percent to $73.88 a barrel at 1.10 p.m. Riyadh time, while US West Texas Intermediate (WTI) crude fell 1.4 percent to $71.40 a barrel. Both benchmarks are headed for a 1.4 percent weekly loss.

In Denmark, South Africa and the UK, the number of new omicron cases has been doubling every two days.

Denmark’s Prime Minister Mette Frederiksen on Thursday warned the government may impose further curbs to limit the spread of omicron.

In the United States, the rapid spread of the omicron variant has led some companies to pause plans to get workers back into offices.

“Messages of caution and warnings of a worsening COVID wave are starting to ring louder with the approach of the year-end holiday season, dampening market sentiment,” said Vandana Hari, energy analyst at Vanda Insights. “Crude may remain in a holding pattern, albeit with plenty of price volatility around the mean, in holiday-thinned trading over the next couple of weeks.”

The Organization of the Petroleum Exporting Countries, Russia and allies, together known as OPEC+, have said they could meet ahead of their scheduled Jan. 4 meeting if changes in the demand outlook warrant a review of their plan to add 400,000 barrels per day of supply in January.

However, Leonid Fedun, a vice president of Russian oil major Lukoil, said on Friday he expected OPEC+ to stick to its decision to raise oil production by 400,000 bpd each month at its meeting in January.

“I don’t see any deviations from the program,” Fedun told reporters when asked about his expectations for the next OPEC+ meeting.

He also said Lukoil would not reach pre-pandemic oil output levels in April, when the OPEC+ deal is due to be phased out.

But despite the omicron threats to demand, Goldman Sachs said on Friday the new variant has had a limited impact on mobility or oil demand, adding it expects oil consumption to hit record highs in 2022 and 2023.

South Africa’s health minister said on Friday that the government believed that vaccines and high levels of prior COVID-19 infection were helping to keep disease milder in a wave driven by the omicron variant.

There have been early anecdotal accounts suggesting that the omicron variant driving the fourth wave, which saw the country report a record number of daily infections earlier this week, is causing less severe illness than previous variants in South Africa but scientists say it is too early to draw firm conclusions.

“We believe that it might not necessarily just be that omicron is less virulent, but … coverage of vaccination (and) … natural immunity of people who have already had contact with the virus is also adding to the protection,” Health Minister Joe Phaahla told a news conference. “That’s why we are seeing mild illness.”

Benchmark Brent and WTI both gained around 2 percent on Thursday, buoyed by record US implied demand and a weaker dollar as the Bank of England surprised markets with a rate hike, taking a more hawkish stance than the Federal Reserve.