Oil price has plunged by more than 3 per cent after Moderna’s CEO cast doubt on the efficacy of COVID-19 vaccines against the new omicron Coronavirus variant, sending shockwaves across the financial market and further heightening worries about oil demand.

Moderna’s CEO is cited to have indicated that COVID-19 vaccines are unlikely to be as effective against the omicron variant of the coronavirus as they have been with the Delta Variant.

This assertion was made by the head of the drug maker today, November 30, 2021.

Brent crude futures fell $2.32, or 3.2% to $71.12 a barrel, after slipping to an intraday low of $70.52, the lowest since September 1, 2021.

US West Texas Intermediate (WTI) crude futures fell $2.15, or 3.1% to $67.80 a barrel, off a session low of $67.06, the weakest since August 26, 2021.

It is expected that Fed Chairman Jerome Powell will also tell US lawmakers later in the day the variant could imperil economic recovery, as prepared remarks cited show.

Paul Donovan, Economist with UBS said in a note: “The economic impact is driven by fear, and by the policy response… Fear is impacting travel. There are outright bans, but also the fear of being stranded which causes travel plans to alter.”

Since Friday, fears of risks associated with the impact of the omicron variant have gripped the markets, on the basis of sparking new fresh lockdowns and dent global oil demand.

On Monday, November 29, 2021, oil prices rebounded by almost 5%, only to tumble today, November 30, 2021. Even, it is still unclear how severe the new variant is.

Outlook for Oil Demand Weakening

With weakening demand outlook, expectations are growing that the Organisation of the Petroleum Exporting Countries (OPEC) and their allies will discontinue plans to add 400,000 barrels per day (bpd) to supply in January 2022.

Vivek Dhar, the Commonwealth Bank commodities analyst also said in a note: “We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers.”

There was pressure already mounting on OPEC+, due to meet on December 2, 2022, to reconsider its supply plans after US President, Joe Biden, led a coordinated release of strategic reserves to address rising energy costs.

However, the emergence of the omicron variant has brought about a new dimension to approaching last week’s release of reserves by the US. The meeting has, therefore, been postponed so that the dynamics of the omicron variant on the global economy can be clued-in.

Edward Moya, OANDA analyst, said in a note: “Following the global strategic reserve releases and the announcement of dozens of countries restricting travel… OPEC and its allies can easily justify an output halt or even a slight cut.”

As oil prices tumble following fears of the dire impact of the omicron variant on the global economy, investors are rushing for safe-haven assets such as gold to hedge against impending shocks in the market.