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Friday, January 28, 2022

Oil Price Continued to Fall Amid Omicron Concerns, OPEC+ Meeting in Focus Starting Wednesday

According to Financial Times, the chief executive officer of Moderna, Stéphane Bancel, issued a warning that the existing vaccine will not be effective against the new Omicron variant due to high numbers of mutations. It would also take months before the world’s top pharmaceutical companies are able to manufacture effective vaccines or boosters to match the new variant. 

He added: “I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to... are like, ‘This is not going to be good’.”

The announcement came when U.S President Biden mentioned in his daily press that Omicron is a cause for concern, but not panic. On Tuesday, The Nasdaq Composite closed at 15537.69, down 1.55%, Dow Jones Industrial Average settled at 34483.72, down 1.86%, and the S&P 500 index also down 1.9%, closing at 4567.00. Crude oil also sank more than 5% on Tuesday, after a 10% plunge last Friday, WTI crude futures closed below 67 dollars.

The Organization of the Petroleum Exporting Countries (OPEC) will meet this Wednesday and Thursday to decide on the fate of the planned 400,000 barrels per day of production increase starting December. 

According to Reuter’s report, Saudi Arabia Energy Minister Prince Abdul Aziz bin Salman previously stated on November 29 that the technical meeting of the “OPEC+” alliance has been postponed to buy time for investigating the development of the new variant, which could potentially ravage the global energy demand. The Minister of Energy of Saudi Arabia also added, “I am not worried about the new mutant strain and its impact on the demand for the oil market.”

Russia’s deputy prime minister also downplayed the fears, stated that he did not think it was necessary to apply emergency actions to the market on the concerns of the Omicron variant. 

However, just two days later, crude oil price dropped another 5%, consistent downward pressure could potentially change OPEC+’s decision. Helima Croft, an analyst from the Royal Bank of Canada said in a customer report that the development of the mutated virus strain and subsequent falling crude futures will increase OPEC + ’s chances to suspend the increase of monthly production by 400,000 barrels/day.

Image source: www.mrt.com 

Jiayang Shao
I am a political and financial news writer who focus on global events. One of my biggest interests is to look at how government policy, geopolitics, macroeconomics, and supply, demand influence the oil market.

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