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Oil Plunges 5% on Fear That Existing Vaccines Can’t Stop Omicron

CommoditiesNov 30, 2021 03:10PM ET
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By Barani Krishnan

Investing.com - Oil prices took a hit for a fourth time in five days, with traders warning that the U.S. crude benchmark could even slip beneath the key $60-per-barrel support, on fears that existing vaccines in the market may not be able to stop the spread of Covid’s newly-discovered Omicron strain.

WTI, or the West Texas Intermediate benchmark for U.S. crude, settled down $3.47, or 5%, at $66.18 per barrel, after an intraday low at $64.44. WTI has lost almost 16% since its last positive close of $78.50 on Nov. 23. It is also down nearly 23% from the seven-year high of $85.41 notched in mid-October.

London-traded Brent crude, the global benchmark for oil, settled down $2.87, or almost 4%, at $70.57. Brent has lost nearly 11% since its last positive close of $82.31 a week ago. It is also down 19% from its seven-year high of $86.70 attained in mid-October.

“There will be some relief bounces from here, but it is all part of greater volatility due to uncertainty,” Samir Madani of tankertrackers.com said in a tweet. “The compass is spinning and we’re drifting in foggy waters for the next couple of weeks. Expect more downside followed by a rocket once Omicron consensus has been reached.”

More importantly, if the present rut isn’t contained, WTI could break below the $60 support based on Tuesday’s chart action alone in the U.S. crude benchmark, some traders warned.

“The fact that we broke below the 200-day SMA (Simple Moving Average) of $65 sets up for a trigger of the $60 support,” said John Kilduff, founding partner at energy hedge fund Again Capital, said. 

“Of course, there are several other SMA markers from $64 to $61 that need to be taken out first,” said Kilduff. “But if the market gets no redemption from either Covid-related fears or supportive OPEC+ action in coming days, then sub-$60 could happen.”

OPEC+, the global oil producers’ alliance, is to hold its monthly meeting on Thursday. Most traders expect the alliance — that groups the 13-nation Organization  of the Petroleum Countries led by Saudi Arabia with 10 other oil producers steered by Russia — to stop the additional 400,000 barrels per day it has either pumped or pledged to pump since July amid heightened demand for crude before the Omicron discovery. 

The WHO, or World Health Organization, said the Omicron variant carried a very high risk of infection surges as more countries closed borders, casting a shadow over economic recovery from the two-year pandemic. But some experts said the variant might prove to be milder than initially feared.

Tuesday’s plunge in oil came after the chief executive of drugmaker Moderna (NASDAQ:MRNA) predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of coronavirus and warned it would take months before pharmaceutical companies could manufacture new variant-specific jabs at scale.

“There is no world, I think, where [the effectiveness] is the same level . . . we had with [the] Delta [variant],” Stéphane Bancel told the Financial Times in an interview. He said the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa suggested that the current crop of vaccines may need to be modified next year.

“I think it’s going to be a material drop,” Bancel added. “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’.”

 

Oil Plunges 5% on Fear That Existing Vaccines Can’t Stop Omicron
 

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Comments (14)
Me comment
Me comment Nov 30, 2021 8:42PM ET
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Why the panic the vaccines haven't stopped covid yet, but they do prevent serious illness and death far better than no vaccine at all.
Shane Weddle
Shane Weddle Nov 30, 2021 4:58PM ET
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Well old friend I correctly called the dip but i never knew the reason until one was found. Time to enter a new long.
Cassius Stone
Cassius Stone Nov 30, 2021 4:58PM ET
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it's crazy how that works. you know something is going to happen but you don't know what it is.
Barani Krishnan
Barani Krishnan Nov 30, 2021 4:58PM ET
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Congrats, Shane. You might want to wait for the $60, or even (God forbid! :) $55 break. Bests, whatever you do, mate.
Bill Riley
Bill Riley Nov 30, 2021 4:16PM ET
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So far, there have been no reported deaths linked to the omicron variant. Meanwhile, many countries including the U.S. have reimposed some travel restrictions in an effort to stem the spread of the new variant.
Barani Krishnan
Barani Krishnan Nov 30, 2021 4:16PM ET
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Thanks for that factual walk-through Bill.
Erick de Miranda
Erick de Miranda Nov 30, 2021 4:15PM ET
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We have even tested Omnicron and panic are panicking like scared goats!!!
Bill Riley
Bill Riley Nov 30, 2021 4:04PM ET
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Continuing inflation that has gone on throughout 2021 without signs of slowing down has led to concerns that the United States could see a repeat of what happened in the 1970s under President Carter.Under Carter, the U.S. experienced inflation and unemployment that were both in the double digits as a result of an oil price shock that began when Iranian oil workers went on strike. The result was year after year of rising prices, perpetuated in part due to expectations of prolonged inflation which led to producers raising prices even more. 
Jimmy Smith
Jimmy Smith Nov 30, 2021 3:54PM ET
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This is completely psychotic!
Alberto Vazquez
Alberto Vazquez Nov 30, 2021 3:38PM ET
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can we please stop the lies and manipulation. I don't see people dropping anywhere.
Robert Francis
Robert Francis Nov 30, 2021 3:37PM ET
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If oil is so cheap now why are we using the strategic reserve
Robert Francis
Robert Francis Nov 30, 2021 3:36PM ET
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so Biden used the strategic reserve because there's too much oil??
muhamad kadhim
muhamad kadhim Nov 30, 2021 3:35PM ET
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May Allah protect us all
Nicolas Duran
Nicolas Duran Nov 30, 2021 3:33PM ET
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Ivermectin
Al Ose
Al Ose Nov 30, 2021 3:32PM ET
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We’ll be fine. Pfizers got out backs
raed parvaz
raed parvaz Nov 30, 2021 3:31PM ET
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what?
Rufina Agayev
Rufina Agayev Nov 30, 2021 3:25PM ET
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Why?
Hama Sha
Hama Sha Nov 30, 2021 3:25PM ET
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No problem
raed parvaz
raed parvaz Nov 30, 2021 3:25PM ET
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what?
 
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