Oil prices declined by nearly $3 on Monday as flooding cases of the Omicron COVID-19 variant in Europe. The United States stoked investor fears that new mobility restrictions to fight its spread could strike fuel demand.
Brent crude futures dropped by $2.79, or 3.7%, to $70.73 a barrel by 1330 GMT, while U.S. West Texas Intermediate (WTI) crude futures were under $3.26, or 4.6%, at $67.60.
According to Craig Erlam, senior market analyst at OANDA, oil prices are getting hammered again. This is because sentiment is turning south and countries are considering deepening restrictions and lockdowns.
None of this augurs well for crude demand in the first quarter of the year.
The Netherlands went into lockdown on Sunday. The chance of more coronavirus restrictions standing imposed ahead of the Christmas and New Year holidays dominated over several European countries.
U.S. health officials advised Americans on Sunday to get booster shots, wear masks and be cautious if they travel over the winter holidays, with the Omicron variant steaming across the world and set to take over as the predominant strain in the United States.
Oil and Gas Rig Count Increased
Meanwhile, U.S. energy companies this week counted oil and natural gas rigs for a second week in a row.
The oil and gas rig count, an early indicator of future output, increased by three to 579 in the week to Dec. 17, conveying its highest since April 2020, as noted by Baker Hughes Co in its closely observed report on Friday.
Lower exports are anticipated from Russia. Nevertheless, with exports and transit of oil from the country scheduled at 56.05 million tonnes in the first quarter of 2022 versus 58.3 million tonnes in the fourth quarter of 2021, a quarterly export plan noticed by Reuters revealed on Friday.
Meanwhile, OPEC+ adherence with oil production cuts stood at 117% in November, up 1% from the prior month.