Oil prices fell more than 3% on Tuesday following Moderna (NASDAQ: MRNA)’s CEO casting doubt on the effectiveness of coronavirus vaccines versus the Omicron COVID-19 variant, alarming financial markets and adding to concerns regarding oil demand.
The head of drugmaker Moderna informed the Financial Times that coronavirus vaccines are questionable as effective versus the Omicron variant of the COVID-19 as they have been facing the Delta variant.
Brent crude futures dropped $2.32, or 3.2%, to $71.12 per barrel at 0912 GMT. Afterward, it slid to an intraday low of $70.52, the weakest after Sept. 1.
U.S. West Texas Intermediate (WTI) crude futures dropped $2.15, or 3.1%, to $67.80 per barrel. This was off a session low of $67.06, the weakest after Aug. 26.
Fed Chairman Jerome Powell might also discuss with U.S. lawmakers that the variant could jeopardize economic improvement later in the day.
Omicron variant sparking fears
Oil fell about 12% on Friday. Other markets are concerned that the heavily mutated Omicron would spark fresh lockdowns and depress global oil demand. It is yet unclear how severe the new variant is.
With a weakening demand outlook, expectations are rising that the Organization of the Petroleum Exporting countries, Russia and their partners, together named OPEC+, will hold plans to join 400,000 barrels per day (BPD) to supply in January.
The pressure was previously arising within OPEC+, scheduled to meet on Dec. 2, to review its supply plan following last week’s release of emergency crude reserves by the United States and other major oil-consuming nations to discuss rising prices.
OANDA analyst Edward Moya stated that following the global strategic reserve releases and the release of dozens of countries restricting travel. OPEC and its partners can easily support a production pause or even a slight cut.
However, Citi analysts expect OPEC+ to proceed to add more barrels in January.
