Oil Slumps 2.6% on Growing Restrictions in Europe over Omicron Variant

Oil prices slumped by more than 2% on Monday as surging cases of the omicron coronavirus variant in Europe and the United States stoked investor worries that new restrictions on businesses to combat its spread may hit fuel demand.

Brent crude futures fell $1.92, or 2.6%, to $71.60 a barrel by 0436 GMT while U.S. West Texas Intermediate (WTI) crude futures fell $2.09, or 3%, to $68.77 a barrel.

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Brent Crude oil futures, technical performance chart.

“Today’s Asia … weak sentiment in oil prices seems to go in line with a weakness seen in the S&P 500 and Nasdaq 100 e-mini futures,” said Kelvin Wong, market analyst at CMC Markets.

″(This is) due to fears of impending restrictions on economic activities to contain the current increasing spread of the COVID-19 Omicron variant worldwide which may increase the risk of demand slowdown.”

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.

U.S. health officials urged Americans on Sunday to get booster shots, wear masks and be careful if they travel over the winter holidays, as the omicron variant raged across the world and was set to take over as the dominant strain in the United States.

Meanwhile, U.S. energy firms this week added oil and natural gas rigs for a second week in a row.

Oil & Gas Indicator Rises to 579.

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

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

China’s diesel exports in November plunged 69% from a year ago as refineries prioritized domestic supply to ease a fuel crunch with state-backed refineries having raised oil processing rates.

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