Crude Oil Climbs as Omicron Fears Subside

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Over the last week or so, the release of a new Covid-19 variant Omicron has caused widespread volatility in the financial markets.

Nowhere was this more evident than in the case of oil, which saw sharp falls amid concerns about the effectiveness of existing vaccines against the variant, and fears of reintroduction of government restrictions.

The World Health Organization’s decision to designate Omicron as a variant of care has caused Brent crude prices to plunge more than 14% in just over a week.

However, over the weekend, reports from South Africa stated that so far, Omicron cases have presented only mild symptoms. In addition, top U.S. health official Dr. Anthony Fauci also stated over the weekend that the early data on the new variant is “encouraging.”

This ray of hope has instilled fresh confidence in the markets this week and suggested that the worst case scenario, which has already been taken into account in oil prices, may not materialize in the end.

The weekend also saw indirect negotiations cease between the United States and Iran on the restoration of the Iranian nuclear deal. Although negotiations could still be fruitful, a postponed resolution will further delay the return of Iranian oil.

Yesterday, as a result of both of these factors, Brent crude prices recovered more than 5% and they continued to rise on Tuesday morning.

Although current news is positive for crude oil, last week’s sell-off serves as a reminder that the pandemic is not completely over and that oil prices will remain particularly vulnerable to some new developments.

Pictured: Admirals MetaTrader 5 – Brent Crude Oil H1 Chart. Date range: 15 November 2021 – 7 December 2021. Date Captured: 7 December 2021. Past performance is not a reliable indicator of future results.

Five-year development in price:

Pictured: Admirals MetaTrader 5 – Brent Crude Oil Weekly Chart. Date range: 24 May 2015 – 7 December 2021. Date Captured: 7 December 2021. Past performance is not a reliable indicator of future results.

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