Oil prices drop on worries about new COVID variant

Oil prices drop on worries about new COVID variant

Oil prices recorded their abruptest daily decline following July on Friday as a new coronavirus variant startled investors and added to worries that a supply excess could swell in the first quarter.

Oil collapsed with global equities markets [MKTS/GLOB] on concerns the variant. Britain said scientists considered the most significant found to date. It could reduce travel and dampen economic increase and fuel demand.

Brent crude dropped $4.07, or 4.9%, to $78.15 per barrel by 0830 GMT.

Following hitting a two-month low throughout the session, U.S. West Texas Intermediate (WTI) crude was under $4.83, or 6.1%, at $73.56 a barrel. There was no settlement for WTI on Thursday due to the Thanksgiving holiday.

Investors were also following China’s answer to the U.S. release of millions of barrels of oil from strategic reserves in coordination with other large consuming nations, the portion of its bid to reduce prices.

Such a release should swell supplies in approaching months, an OPEC source stated. This is based on a panel of experts that advises ministers of the Organization of the Petroleum Exporting Countries.

The Economic Commission Board expects an excess of 400,000 barrels per day (BPD) in December. It should increase to 2.3 million BPD in January and 3.7 million BPD in February. However, this will be the case if consumer nations will go forward with the release, the OPEC source stated.

Predictions for December

The forecasts cloud the viewpoint for a Dec. 2 meeting of OPEC and its partners, known as OPEC+, when the group will consider adjusting its plan to increase output by 400,000 BPD in January and away.

PVM analyst Tamas Varga said that OPEC’s initial assessment of the regulated (stockpile) release and the sudden emergence of a new coronavirus variant raise severe worries about economic growth and the oil balance in the coming months.

Iranian production was also in the center. There were indirect talks because of the resume on Monday between Iran and the United States reviving a 2015 nuclear deal that could boost U.S. sanctions on Iranian oil exports.

Nevertheless, the failure of Iran and the International Atomic Energy Agency to reach even a simple agreement on monitoring Tehran’s nuclear facilities this week bodes poorly for next week’s talks, Eurasia analyst Henry Rome spoke.