Despite expectations that the new omicron variant will be mild, the potential consequences on global oil demand for this year remain unknown
Oil was down on Thursday morning in Asia, giving up some of its gains from the past two sessions, with uncertainty remaining over the near-term impact of the omicron COVID-19 variant on fuel demand.
Despite expectations that the new omicron variant will be mild and short-lived, the potential consequences on global oil demand for this year remain unknown.
The World Health Organization head warned Wednesday that although the omicron variant may be less severe than delta, it remains a dangerous variant, particularly for the unvaccinated.
Brent oil futures inched down 0.17% to $85.53 by 3:46 AM GMT and West Texas Intermediate (WTI) futures inched down 0.15% to $82.52.
Wednesday’s U.S. crude oil supply data from the U.S. Energy Information Administration (EIA) showed a draw of 4.553 million barrels in the week to Jan. 7.
Crude oil supply data from the American Petroleum Institute (API) released the day before, showed a draw of 1.077 million barrels.
Gasoline demand was weaker-than-expected and still below pre-pandemic levels, and if this becomes a trend, oil won't be able to continue to push higher, OANDA analyst Edward Moya said in a note.
However, the omicron impact is expected to be short-lived, the note added.
The bigger-than-expected drawdown in crude inventories and the fact that stockpiles are at their lowest level since October 2018, had given the market a boost.
However, ‘in reality, the weekly EIA report was less bullish than the headline number, as total crude oil inventories fell 4.8 million barrels but were more than offset by a stock build across refined products,’ Citi said in a note.
ANZ Research also pointed out that commercial flight numbers are 16% below 2019 levels for the week to Jan. 11. This was at least an improvement from the last week of December 2021, when numbers were down 20% on pre-COVID-19 levels, according to FlightRadar 24.