Oil Extends Losses on Omicron Spread Uncertainty, China Demand - Bloomberg

Oil Extends Losses on Omicron Spread Uncertainty, China Demand - Bloomberg

PRICES:

West Texas Intermediate for January delivery dropped 1.3% to $69.83 a barrel at 2:04 p.m. in Singapore after falling 0.8% on Tuesday. Brent for February settlement slumped 1.1% to $72.86 a barrel. Brent’s prompt timespread was at 7 cents a barrel in backwardation after briefly flipping into contango on Tuesday. Oil declined for a third day as further restrictions were imposed to counter the spread of the omicron Covid-19 variant while the outlook for demand in China dimmed as Beijing cracks down on the virus, pollution and rule-breakers. Futures in New York tumbled to below $70 a barrel, extending this week’s decline to more than 2%. China, the world’s biggest importer of crude, is set to start 2022 with a subdued appetite that will partially offset the traditional increase in demand from refineries to replenish inventories during the winter months. That comes as the Paris-based International Energy Agency says that the global market has already returned to surplus and that jet fuel demand is faltering due to omicron. On Tuesday, Brent’s prompt timespread briefly flipped into contango, a bearish signal suggesting supplies are plentiful. Oil’s drop this week has eaten into a partial recovery from a bear market at the end of November. The fast increase in omicron cases, which have surged to 3% of all those sequenced in the U.S. just this month, coupled with another report showing inflation running hot are likely to damp risk appetite, which is being reflected in thinning trading volumes ahead of the year-end holiday season. Aggregated trading volumes for the U.S. benchmark on Tuesday shrank to the lowest since Nov. 24.