Flight suspensions for the Omicron variant throw oil prices down

Oil in the United States fell on Monday morning, after airlines suspended thousands of flights during the Christmas holidays amid a surge in Covid-19 cases, though Brent was supported by hopes that the Omicron variant will have a limited impact on global demand.

US airlines canceled more than 1,300 flights on Sunday as Covid-19 infections reduced the number of available crew members, while several cruise ships had to cancel stopovers.

At 09:48 GMT, US West Texas Intermediate (WTI) oil was down 89 cents, or 1.2%, at $ 72.90 a barrel. The US market was closed on Friday due to the Christmas holidays. Global benchmark Brent was up 12 cents, or 0.2%, at $ 76.26.

“Fewer trips equate to less economic activity in the United States, which equates to lower WTI prices,” said Jeffrey Halley, an analyst at brokerage OANDA, adding that the divergence between Brent and WTI could reflect that the recovery is ongoing.

“The disruption of the flow of goods and services by the isolation of workers, particularly in air travel, appears to be the main sequel so far,” he said of the growing Ómicron cases. “That is likely to only cause nervousness in the short term, as the global recovery story for 2022 is still underway.”

Brent has risen more than 45% this year, supported by recovery in demand and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC +. Oil rose last week after early data suggested that Ómicron could cause a milder illness.

“Although Ómicron is spreading faster than any variant of COVID-19, relatively reassuring news is that most people infected with Ómicron are showing mild symptoms, at least so far,” said Leona Liu, analyst at DailyFX, with Headquartered in Singapore.

Today talks are resuming between world powers and Iran on reactivating the 2015 nuclear deal with Tehran, something that could eventually lead to increased Iranian oil exports. The talks appear to have made little progress toward that end.

Also on investors’ radar is the upcoming OPEC + meeting on January 4, in which the producer alliance will decide whether to go ahead with the planned increase in its production by 400,000 barrels per day (bpd) in February.


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