Oil Prices Impacted By Omicron, More US Drilling Rigs Reported

Oil prices continued to trade lower in Friday dealings, with January West Texas Intermediate crude down $1.43, or 2%, at $70.95 a barrel on the New York Mercantile Exchange.

Crude oil prices fell on Friday and were also down on the week as surging cases of the Omicron coronavirus variant raised fears that new restrictions may hit fuel demand.

There are concerns about COVID that won’t go away, and the perception that could weigh on demand is putting pressure on the market.

Brent crude futures settled down $1.50, or 2%, at $73.52 a barrel, while US West Texas Intermediate (WTI) crude dropped $1.52, or 2.1%, to settle at $70.86 a barrel. Brent was down 2.6% on the week and WTI fell 1.3%.

In Denmark, South Africa and Britain, the number of new Omicron cases has been doubling every two days. Danish Prime Minister Mette Frederiksen said on Friday her government would propose new restrictions to limit the spread. In the United States, the rapid spread of the Omicron variant has led some companies to pause plans to get workers back into offices.

Messages of caution and warnings of a worsening COVID wave are starting to ring louder with the approach of the year-end holiday season, dampening market sentiment. Crude may remain in a holding pattern, albeit with plenty of price volatility around the mean, in holiday-thinned trading over the next couple of weeks.

OPEC+ have said they could meet before their scheduled Jan. 4 meeting if changes in the demand outlook warrant a review of their plans to add 400,000 barrels per day of supply in January.

Further consolidation is seen around $70 in the coming sessions as traders learn more about Omicron, what restrictions it will bring, and whether OPEC+ will react.

The US oil rig count, a leading indicator of output, rose in the week, prompting concerns of potential oversupply. The oil and gas rig count, an early indicator of future output, rose by three to 579 in the week to Dec. 17, energy services firm Baker Hughes Co said in its closely followed report on Friday.

But despite the Omicron threats to demand, Goldman Sachs said on Friday the new variant has had limited impact on mobility or oil demand, adding that it expected oil consumption to hit record highs in 2022 and 2023. read more Oil prices have retreated from multi-year highs earlier in the fourth quarter on improved supplies.

Baker Hughes on Friday reported that the number of active US rigs drilling for oil rose by four to 475 this week.

The rig count was also up by four in the previous week, Baker Hughes data show. The total active US rig count, which includes those drilling for natural gas, climbed by three to 579, according to Baker Hughes.