Vaccine Effectiveness Worries Have Pushed Oil Prices Down
After Moderna’s CEO raised skepticism about the effectiveness of COVID-19 vaccinations against the Omicron COVID-19 strain, financial markets were spooked and oil prices fell more than 3%.
COVID-19 vaccinations, according to the director of pharmaceutical Moderna, are unlikely to be as effective against the Omicron variant of the coronavirus as they have been with the Delta strain.
Brent oil futures lost $2.32, or 3.2%, to $71.12 a barrel at 07:29 GMT, after falling to an intraday trough of $70.52 on September 1. WTI oil futures in the United States slid $2.15, or 3.1%, to $67.80 per barrel, off a session low of $67.06, the lowest since Aug. 26.
Volatile Market Because Of Uncertainty
According to a Singapore oil dealer who requested anonymity owing to business rules, the Moderna CEO’s remarks were only a spark for an already poor market.
Oil fell nearly 12% on Friday, along with other commodities, on expectations that the significantly mutated Omicron will cause new lockdowns and slow the global economy, reducing oil consumption.
On Monday, the World Health Organization said that Omicron presented a very high risk of transmission outbreaks, and some nations tightened travel restrictions. It is yet unknown how dangerous the new variation is and if it is resistant to existing vaccinations.
With the demand forecast cloudy, there is rising speculation that the Organization of Petroleum Exporting Countries, Russia, and its allies, known as OPEC+, may postpone plans to implement 400,000 barrels per day (BPD) of production in January.
Commonwealth Bank products researcher Vivek Dhar stated in a note that the organization will pause output increases in consideration of the Omicron strain and the release of oil stockpiles by major oil users.
Following the publication of emergency crude stockpiles by the United States and other major oil-consuming countries last week to address skyrocketing prices, demand was already building inside OPEC+, which is scheduled to meet on December 2 to reevaluate its supply strategy.
Justification For Policy Implementation Delay
According to OANDA expert Edward Moya, after the strategic reserve deployments and the declarations of dozens of countries banning travel into and out of South Africa and neighboring countries, OPEC and its partners can easily justify a pause or even a minor drop in production.
Nonetheless, Citi analysts believe OPEC+ will continue to increase barrels in January.
Due to a lack of investment, OPEC+ real monthly contributions have totaled 262,000 b/d versus 400,000 b/d. This is owing to the incapacity of so many OPEC+ nations to produce at the rate of their standards.
Because of the disparity, delaying that (little) quantity would have no impact on the global supply/demand equilibrium for oil.
The potential for a restart of Iranian oil shipments is also pushing the market, following hopeful statements from officials as discussions between global powers and Iran on renewing a nuclear accord started on Monday.