Crude Oil Falls On Easing Supply Disruptions

Oil prices weakened Monday as supply problems in Kazakhstan and Libya eased, while concerns grew about the rapid rise of Omicron cases in China, the second largest economy in the world.

West Texas Intermediate, the benchmark for US crude, settled down by 67 cents, or 0.9%, at $78.24 per barrel. Brent, the global benchmark for oil, gave up 88 cents, or 1.1%, to settle at $80.92 at the time of writing. During early trading, both contracts rose by about 50 cents.

While several countries are adapting to live with Covid, China clearly continues to pursue its zero-covid policy. This is a risk to oil demand since China is the largest crude oil importer in the world.

As the Chinese New Year is approaching, a time when there is normally plenty of domestic travel, and so any domestic restrictions will weigh on oil consumption.

The Chinese port city of Tianjin announced plans Monday to test its 14 million residents in the next 48 hours after finding several Covid cases, including Omicron.

Prices up 5% last week on Kazakhstan and Libya supply issues. Libyan production ticked up on Monday, and simultaneously, Chevron says Kazakhstan’s largest oil venture Tengizchevroil (TCO) is increasing oil production gradually.

Oil prices are following the stock market lower on Omicron fears. The market also pulled back from early-session gains as Libya said production output was increasing.

World stocks stumbled again while the 10-year Treasury yield hit a two-year high as investors pared risky assets on bets the US Federal Reserve could raise interest rates as soon as March. Concerns about the Omicron variant of the coronavirus bled into the oil market, pushing crude prices lower.