By Barani Krishnan
Investing.com - It ain’t over till it’s over, ace baseballer Yogi Berra said. For oil, both the fears over the Omicron wave and the late market downturn of the year aren’t over.
Benchmark crude futures traded on both sides of the Atlantic were down about 4% on Monday, extending last week’s downturn, as the latest wave of Omicron washed ashore in Europe and the United States, adding dramatically to Covid case counts and hospitalizations.
Death rates remained unalarming, provoking angry reactions from those opposed to fears over the pandemic, including the so-called anti-vaxxers and bulls across energy markets who view the new demands, safeguards and restrictions put on society as a conspiracy to kill this year’s oil rally.
“The hit to the oil market may not be over yet,” Phil Flynn, energy analyst at Chicago’s Price Futures Group and an avowed oil bull, said in a commentary.
“Lockdown fears may create more fear than reality,” added Flynn. “This week the US should see more oil draws and products should tighten. Yet we have to wait until Tuesday until we see that data. Before that, with light holiday volume, we might run on fear.”
The Netherlands went into lockdown on Sunday and the possibility of more Covid-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries.
U.S. health officials, meanwhile, urged Americans on Sunday to get booster shots, wear masks and be careful if they travel over the winter holidays, as the Omicron variant raged across the world and was set to take over as the dominant strain in the United States.
Adding to the bearish sentiment was news that President Joe Biden’s signature $1.75-trillion “Build Back Better” infrastructure agenda was likely doomed by fellow Democrat Senator Joe Manchin’s last-minute refusal to vote for the plan. Manchin is one of the 50 Democrat senators in a divided Senate that has 50 Republicans as well. Goldman Sachs lowered its U.S. growth forecast on the news, because of a likely drop in government spending.
Even positive news that oil output in Libya, one of the more important producers of OPEC, has fallen did not make much of an immediate impact in Monday’s trading session and may only lift sentiment slightly on Tuesday, when crude market participants await weekly industry data, said Samir Madani, a closely-followed market source.
“Expect some brief relief tomorrow in the oil price after today’s drop due to the news about Libya, but bear in mind that the tables have turned,” Madani tweeted Monday afternoon in New York. This time the oil production outage is in GNA territory (and only onshore), which outputs less than the wells in LNA territory.”
GNA territory refers to jurisdictions under the rule of the U.N.-endorsed Government of National Accord in Libya while LNA territory stands for areas previously under the rule of renegade general Khalifa Haftar of the Libyan National Army.
West Texas Intermediate, the benchmark for U.S. crude, settled down $2.63, or 3.7%, at $68.23 a barrel, after oscillating between a session peak of $69.53 and low of $66.14. Last week, WTI fell 1.1%. It hit seven-year highs of $85.41 in mid-October, before falling.
London-traded Brent, the global benchmark for oil, was down $1.90, or 2.6%, at $71.62 a barrel by 2:37 PM ET (19:37 GMT), after a session high of $72.44 and bottom of $69.29. Last week, Brent was down 3.3%. The global crude benchmark hit $86.70 in mid-October, matching highs from 2014, before falling.