Oil Holds Drop With OPEC Demand Forecast Offset by Omicron Fear

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Oil Holds Drop With OPEC Demand Forecast Offset by Omicron Fear
Credit: © Reuters.

(Bloomberg) -- Oil held a decline as an increase in OPEC’s demand forecast for next quarter was offset by uncertainty over the omicron virus variant. 

West Texas Intermediate was little changed near $71 a barrel in Asia after slipping 0.5% on Monday. The Organization of Petroleum Exporting Countries boosted estimates for oil consumption by 1.1 million barrels a day, according to a monthly report from the group’s research department. The cartel still sees a surplus in the first quarter, albeit not as large as previously expected. 

“OPEC’s anticipation of a surplus in the global oil market suggests an imminent correction in prices, with WTI possibly retesting the $60 level,” Bloomberg Intelligence analyst Henik Fung said in a note. “The outlook for demand may be affected by a one-two punch of omicron’s spread across Europe and the Fed’s hawkish stance on inflation.”

Oil has staged a partial recovery this month after tumbling into a bear market at the end of November. Economic risks from the omicron virus strain and central bank efforts to rein in accelerating inflation are likely to see reduced risk appetite from traders, especially with the end of the year approaching.   

Omicron dented the protection afforded by two doses of Pfizer Inc (NYSE: PFE ).’s and AstraZeneca (NASDAQ: AZN ) Plc’s Covid vaccines as feared, according to University of Oxford researchers, while U.K. Prime Minister Boris Johnson declined to rule out further restrictions to contain the variant.

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