Energy Report: Omicron Plunge

A historic oil plunge as traders and computers set off a selling wave on reports of the spreading Omicron variant of the COVID-19 plague. The omicron variant of COVID-19 first identified in South Africa has been detected in locations from Australia to Germany and Canada,  and as many as 12 countries. The market went omicron crazy but raised worries of larger underlying problems with the global economy.  The reality was in short supply, but fear permeated all markets. Oil tanked 13% but is now recovering as cooler heads are trying to prevail. We could still see some swings after a lot of technical chart damage, yet the odds are that the market priced in a lot more demand destruction that should happen. The market has priced in the equivalent of an overnight drop in demand of over 4 million barrels a day while the reality will be nowhere close to that.

Photo by Martin Adams on Unsplash 

OPEC delayed its technical meeting as they are trying to get a handle on just how bad this will be. We believe that it is more than likely to decide to delay its production increase despite reports that OPEC Plus is just watching market conditions. Reuters reports that Russia sees no need for urgent action on the oil market over the new Omicron coronavirus variant, Deputy Prime Minister Alexander Novak was quoted as saying on Monday, downplaying the possibility of changes to an OPEC+ oil supply deal this week. OPEC Plus will hold online meetings this week to decide on oil production policy on Thursday.

In the meantime, the market waits to get a handle on whether this new variant will have a lasting impact and be as big of a threat to oil demand that the market seemed to suggest. Based on some early reports it may not be as bad as feared yet there are still a lot of unknowns as scientists wait for more data.

Zerohedge reports that “Barry Schaub, chairman of the Ministerial Advisory Committee on Vaccines, told Sky News on Sunday that while South Africa, which first identified the new variant, currently has 3,220 people with the coronavirus infection overall and while the variant does appear to be spreading rapidly, there’s been no real uptick in hospitalizations. “The cases that have occurred so far have all been mild cases, mild-to-moderate cases, and that’s a good sign,” said Schaub, adding that it was still early days, and nothing was certain yet.

1 2
View single page >> |

Disclaimer: Make sure you get signed up for exclusive info and my Daily Trade Levels by calling Phil Flynn at 888-264-5565 or email me at  more

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.