Fear of Omicron Sends International Oil Prices Plunging... Brent Crude Falls Below $70 (Comprehensive)

Vaccine Effectiveness Seen as Limited, Plummeting to 5% Range
Demand Concerns Amid Expected Expansion of US CDC Travel Restrictions

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] International oil prices plunged as fears over the COVID-19 Omicron variant spread and caution ahead of the oil production adjustment meeting by the major oil-producing countries' coalition OPEC Plus (OPEC+) combined. Concerns that existing vaccines may not be effective against the Omicron variant, leading to a contraction in oil demand, played a significant role.

On the 30th (local time) at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil fell sharply by 5.38% from the previous session to $66.18, marking the lowest level in over three months since August 23. Compared to the yearly high of $84.65 recorded on October 26, it plunged 21.81% in just over a month, marking the largest monthly drop since the COVID-19 pandemic began. Brent crude oil on the London ICE exchange also dropped 5.45% from the previous day to $69.23, falling below the $70 mark.

International oil prices started the day sharply lower following remarks about the Omicron variant by Steve Bancel, CEO of Moderna. The previous day, in an interview with major foreign media, CEO Bancel stated, "Existing vaccines may not be as effective against the Omicron variant as they were against the Delta variant," which sparked controversy. Another Moderna co-founder, Noubar Afeyan, chairman of Moderna's board, also said in an interview with Bloomberg News, "We must accept the serious threat posed by the Omicron variant," further spreading fear.

Additionally, as the U.S. Centers for Disease Control and Prevention (CDC) announced plans to strengthen travel restrictions for incoming travelers, concerns about the resumption of lockdown measures in various countries increased, dampening investor sentiment. On the same day, CDC Director Rochelle Walensky said at a White House COVID-19 briefing, "To enhance surveillance of the Omicron variant, we are increasing virus testing for travelers arriving at four major airports," adding, "We are also considering shortening the testing period for arrivals and, in some cases, adding quarantine requirements."

Carsten Fritz, a commodity analyst at Commerzbank, told MarketWatch, "The international oil market is reflecting concerns about the resumption of lockdowns and travel restrictions by countries in response to the Omicron variant," adding, "While it is still difficult to accurately predict the impact on oil demand, the fact that prices have dropped more than $10 since the 26th suggests a serious impact is expected."