Over the last week or so, the emergence of new Covid-19 variant Omicron has caused widespread volatility in the financial markets.
Nowhere has this been more evident than with crude oil, which has seen sharp falls amidst concerns over the efficacy of existing vaccines against the variant, and fears of a reintroduction of restrictions by governments.
The World Health Organisation’s decision to designate Omicron as a variant of concern 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 had presented only mild symptoms. Furthermore, top US health official Dr Anthony Fauci also stated on the weekend that the early data regarding the new variant was ‘encouraging’.
This ray of hope has breathed fresh confidence into the markets this week and suggested that the worst-case scenario, which had already been factored into oil prices, may not materialise after all.
The weekend also saw indirect talks stall between the US and Iran regarding the reinstatement of the Iran nuclear deal. Whilst the negotiations could still be fruitful, a delayed resolution will further push back the return of Iranian crude.
Yesterday, as a result of both of these factors, Brent crude prices recovered more than 5% and they have continued rising on Tuesday morning.
While the current news is positive for crude oil, last week’s sell-off serves as a reminder that the pandemic is not quite over and that oil prices will remain especially vulnerable to any new developments.
Depicted: 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 evolution in price:
Depicted: 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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