Jakarta, CNBC Indonesia – Global oil prices have plunged more than 10% which is the biggest daily drop since April last year after the latest variant of Covid-19 raised concerns in the market about the possibility of global travel restrictions that could derail the recovery in oil prices.
The new Covid-19 variant, which has been dubbed Omicron, caused the price of Brent crude to drop US$9.50, or 11.55%, to US$72.72 per barrel on Friday US time after countries across Europe and Asia imposed direct travel restrictions to prevent the spread of the virus variant B.1.1.529 identified in several African countries.
The price of US West Texas Intermediate (WTI) oil per barrel also plunged US$ 10.24, or 13.06%, to US$ 68.15 on Friday (26/11) US time and was one of the steepest declines since the economic shutdown. last year which caused oil prices to turn negative for the first time across the US.
Both crude oil prices have contracted for five straight weeks and are the longest weekly losing streak since March 2020.
Decrease in travel and potential lockdown can only suppress demand, comes just when supply will increase.
“It seems that the discovery of the Covid-19 variant in southern Africa spooked the market as a whole. Germany is already restricting travel from some countries in the affected region,” said John Kilduff, partner at Again Capital, quoted by CNBC International (28/11).
“The last thing you want [pasar] oil is another threat to the recovery of air travel, “he added.
On Tuesday, the Biden Administration announced plans to release 50 million barrels of oil from the Strategic Petroleum Reserve. The move is part of a global effort by energy consuming nations to calm price increases so far this year. India, China, Japan, South Korea and the UK will also release some of their reserves.
OPEC and other oil-producing alliances will meet on December 2 to discuss production policy for January and beyond. The organization is slowly easing historic production curbs agreed in April 2020 as the coronavirus weakens demand for petroleum products.
Since August the group, known as OPEC+, has returned 400,000 bpd to the market every month.
The group has maintained gradual declines despite calls from the White House and others to raise output as oil prices soared to multi-year highs. West Texas Intermediate crude futures hit a seven-year high in October, while Brent rose to a three-year high.
Currently US Oil is down more than $15 since October’s high of $85.41.
The emergence of this new Covid variant has created a long list of threats to oil prices, especially before oil prices have also been slightly depressed due to the increase in Covid-19 cases in Europe. The World Health Organization (WHO) even said 500,000 people could die by March next year if they didn’t take immediate action to curb the spread of the coronavirus.
Austria, has announced that it will carry out a full lockdown starting Monday (22/11) yesterday until December 12, it could even be longer. Due to the increasing number of cases, Austria is now requiring its citizens to be vaccinated from February 2022.