Oil prices fell on Monday as a result of U.S. airlines cancelling thousands of flights during the Christmas holidays due to an increase in COVID-19 cases, however losses were contained by optimism that the Omicron form would have little impact on global demand.
On Sunday, US airlines cancelled around 1,300 flights as COVID-19 decreased the amount of available personnel, and some cruise ships had to cancel stops.
By 1222 GMT, US West Texas Intermediate (WTI) crude was down $1.20, or 1.6 percent, to $72.59 per barrel. Friday was a holiday in the United States, so the stock market was closed. Brent crude futures dipped 8 cents, or 0.1 percent, to $76.06.
“Fewer travel equals lower economic activity in the United States equals lower WTI,” said Jeffrey Halley, an analyst at brokerage OANDA, adding that the spread between Brent and WTI could indicate that the global recovery is on track.
“The biggest impact so far appears to be the disruption of goods and services from isolating workers, particularly air travel,” he said of the mounting Omicron cases. “With the global recovery storey for 2022 still on track, this is only likely to cause short-term concerns.”
Brent has increased by more than 45 percent this year, owing to rebounding demand and production curbs by OPEC and its partners, together known as OPEC+.
Oil rose last week after preliminary research revealed that Omicron could produce a lesser kind of illness than previously thought. It had dropped by more than 10% on Nov. 26 when rumours of a new variety initially surfaced.
“Though Omicron is spreading quicker than any COVID-19 variation so far, the good news is that most persons infected with Omicron are only experiencing minor symptoms,” said Leona Liu, an analyst with Singapore-based DailyFX.
World powers and Iran are meeting today to discuss renewing the 2015 nuclear deal. Iran claimed on Monday that oil exports were the focus of the discussions, which appear to have made little progress so far in terms of increasing Iran’s supplies.
The next OPEC+ meeting, which takes place on January 4, will determine whether the producer alliance will proceed with a planned 400,000 barrels per day (bpd) production rise in February.
OPEC+, despite Omicron, persisted to its plans to increase output in January at its recent meeting.
