Oil down $10/bbl in largest daily drop since April
Oil prices plunged $10 a barrel on Friday, its largest one-day drop since April 2020, as a new variant of the coronavirus spooked investors and added to concerns that a supply surplus could swell in the first quarter of next year.
Oil fell with global equities markets on fears the variant, could dampen economic growth and fuel demand.
The World Health Organization has designated the new variant, which it named Omicron, as “of concern,” according to the South African health minister.
The United States, Canada, Britain, Guatemala and European countries are among those to restrict travel from southern Africa, where the variant was detected.
Brent crude settled down 11.6 percent on Friday, to $72.72 a barrel, a weekly decline of nearly 8 percent. WTI crude settled down 13.1 percent on Friday at $68.15 a barrel, declining more than 10.4 percent on the week in high volume trading after Thursday’s Thanksgiving holiday in the United States.
Both contracts fell to a fifth week of losses and their steepest falls in absolute terms since April 2020, when WTI turned negative for the first time amid a coronavirus-induced supply glut.
News of the variant caused ructions in a market previously caught between producer and consumer nations.
Asian liquefied natural gas (LNG) prices inched lower last week, on concerns over the potential impact of a new coronavirus variant but were still supported by higher heating demand and tight shipping availability.
The average LNG price for January delivery into Northeast Asia slipped to $36.10 per metric million British thermal units (mmBtu), down $0.60 from the previous week.
Prices remain just $2.40 shy of the record level observed in mid-October. Prices for February delivery were estimated around $35.15 per mmBtu.
News of a new coronavirus variant detected in South Africa pressured global stocks, as well as oil markets, with the EU and Britain tightening border controls as scientists sought to find out if the mutation was vaccine-resistant.
However, analysts do not expect the decline in gas prices to last long. Prices have been climbing globally over the last couple of days as new demand has emerged and some supply has wavered.
In Europe, concerns over the implementation of Nord Stream 2 continue to drive the agenda and demand. As a result, European TTF prices gained 2.6 percent last week, closing at $29.35 per mmBtu on Friday.
US Henry Hub prices were also up 7.5 percent on the week.
Source: The Peninsula Qatar