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Oil settles down $10/bbl in largest daily drop since April 2020

CommoditiesNov 26, 2021 02:25PM ET
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2/2 © Reuters. FILE PHOTO: An oil tanker waits in line in the ocean outside the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021. REUTERS/Lucy Nicholson/File Photo 2/2

By Laura Sanicola and Jessica Resnick-Ault

(Reuters) - Oil prices plunged $10 a barrel on Friday, their largest one-day drop since April 2020, as a new variant of the coronavirus spooked investors and added to concerns that a supply surplus could swell in the first quarter.

Oil fell with global equities markets on fears the variant, could dampen economic growth and fuel demand.

The World Health Organization has designated the new variant, which it named Omicron, as "of concern," according to the South African health minister.

The United States, Canada, Britain, Guatemala and European countries are among those to restrict travel from southern Africa, where the variant was detected.

Brent crude settled down $9.50, or 11.6%, to $72.72 a barrel, a weekly decline of more than 8%.

U.S. West Texas Intermediate (WTI) crude settled down $10.24 on Friday, or 13.1%, at $68.15 a barrel, declining more than 10.4% on the week in high volume trading after Thursday's Thanksgiving holiday in the United States.

"The market is factoring in a worst case scenario situation in which this variant causes massive demand destruction," said Bob Yawger, director of energy futures at Mizuho.

Both contracts fell to a fifth week of losses and their steepest falls in absolute terms since April 2020, when WTI turned negative for the first time amid a coronavirus-induced supply glut.

News of the variant caused ructions in a market previously caught between producer and consumer nations.

"The biggest fear is that it will be resistant to vaccines and be a massive setback for countries that have reaped the benefits from their rollouts," said Craig Erlam, senior market analyst at OANDA.

OPEC+ is also monitoring developments around the variant, sources said on Friday, with some expressing concern that it may worsen the oil market outlook less than a week before a meeting to set policy.

Scientists have so far only detected the Omicron variant in relatively small numbers, mainly in South Africa but also in Botswana, Hong Kong and Israel, but they are concerned by its high number of mutations which could make it vaccine-resistant and more transmissible.

Drug makers Pfizer (NYSE:PFE) and BioNTech said if necessary they would be able to redesign their shot within 6 weeks and ship initial batches within 100 days.

South Africa's foreign ministry said it would speak to Britain to try to get it to reconsider its travel ban.

"Our immediate concern is the damage that this decision will cause to both the tourism industries and businesses of both countries," Foreign Minister Naledi Pandor said in a statement.

Oil prices rose early in the week as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) suggested it could taper production in response to a strategic release from large consuming countries that are members of the International Energy Agency.

Such a release was likely to swell supplies in coming months, an OPEC source said, based on findings of a panel of experts that advises OPEC ministers.

The forecasts cloud the outlook for a Dec. 2 meeting when the group will discuss whether to adjust its plan to increase output by 400,000 barrels per day in January and beyond.

"OPEC's initial assessment of the co-ordinated (stockpile) release and the sudden appearance of a new variant of the coronavirus raises serious concerns about economic growth and the oil balance in coming months," PVM analyst Tamas Varga said.

Oil settles down $10/bbl in largest daily drop since April 2020
 

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Comments (11)
Mark Stallone
Mark Stallone Nov 26, 2021 3:26PM ET
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RELAX. It's all part of Building Back "Better". L.G.B.
Tony Smith
Tony Smith Nov 26, 2021 1:48PM ET
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So, stock markets across the world plunged, and countries around the world started implementing travel bans today, based on news of the new "Covid variant" in South Africa. The price of oil plunged 12.6%! The 7 day moving average for Covid deaths in South Africa is 20 deaths per day. Why are people so fearful and easily manipulated?
Tony Smith
Tony Smith Nov 26, 2021 1:46PM ET
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So, stock markets across the world plunged, and countries around the world started implementing travel bans today, based on news of the new "Covid variant" in South Africa. The price of oil plunged 12.6%! The 7 day moving average for Covid deaths in South Africa is 20 deaths per day. Why are people so fearful and easily manipulated?🙄
Whaling Trawler
Whaling Trawler Nov 26, 2021 1:34PM ET
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...lol embrace the fakeness
morning wood
morning wood Nov 26, 2021 11:18AM ET
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thank you Mr. President for releasing new virus to fight oil price
Yekson Alef
Yekson Alef Nov 26, 2021 9:44AM ET
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lol. What a good speculation to push down an oil price. This is an ecomonic war between US and Opec+. Obviously US and its allied is suffering on high retail fuel price currently which will cause the inflation even become worse in upcoming future. They all also already agreed to release their oil reserve and the main purpose is obviously to push down the oil price with hope opec+ increase their daily production. With this strategy, they can shopping back the oil at open market with bulky quantity and restock back their reserve pile with the same time stablize their in-house fuel price to drive back the economy.
Kamaljeet Singh
Kamaljeet Singh Nov 26, 2021 8:45AM ET
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UAE may plan to reduce oil drilling due to new varrient
Stephen Tan
Stephen Tan Nov 26, 2021 4:55AM ET
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since there is breakout of covid, oil supply shud be cut further.
Stephen Tan
Stephen Tan Nov 26, 2021 4:55AM ET
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since there is breakout of covid, oil supply shud be cut further.
Rosh Jardine
RoshJardine Nov 26, 2021 12:02AM ET
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While in the background oil transactions is ongoing..lmao..once done..sudden breakout occurs lol
AC TCHAKOUNTE
AC TCHAKOUNTE Nov 25, 2021 9:34PM ET
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Sorry but I totally disagree with the reason pushed in this article. Oil already rebounded from the SPR news yesterday as this is just making the issue worst. OPEC+ response might very well counter attack on this bullcrap news. The rral story behind all this is the BS new variant from South Africa. That is what is spooking the market which always shoot first and ask questions next on this type of news. It might be a coordinated attack to push oil prices down amd push the agenda of some powerful forces.
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trevor hron
trevor hron Nov 25, 2021 9:34PM ET
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I think so too. If they’re resorting to releasing out of the SPR then there ia a desperate need for more oil. This release equates to less than one day of world demand. Especially with it being released over the next several months. It just gives OPEC+ a reason to hold back on increasing supply. Or even reverse courae on their increased output. They’re definetly going with the story as an excuse for no action. Or retaliation and do cuts instead of increases. This release is a drop in the lake or even the ocean compared to demand. Now we have companies like GAP choosing to have their products air flighted to make sure they have their shelves full for the Holidays. This should equal a huge increase in demand since it requires way more fuel per ton of cargo with a jet compared to shipping vessels. Plus a robust economy. The Democrats are gripping at straws here.
William Smith
William Smith Nov 25, 2021 9:34PM ET
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This is like the 800th variant.
Aleksandr Radchenko
Aleksandr Radchenko Nov 25, 2021 9:34PM ET
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Just Black Friday. Buy with discount.
Andrew Ulferts
Andrew Ulferts Nov 25, 2021 9:34PM ET
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OPEC+ meeting next week and a new “variant” just happens to pop up in Africa, the least “vaccinated” place on Earth, with almost no Covid cases/ deaths because they take HCQ prophylactically for Malaria once per week…… OPEC+ will adjust output. They likely inspired this “news” release. Don’t mess with OPEC+. Remember who these people are. They are not stupid, and not brand new.
Ac Tektrader
Ac Tektrader Nov 25, 2021 9:34PM ET
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most national governments in Africa do not have the ability to accurately record the number of covid-19 cases in their respective countries.
 
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