Global crude prices have fallen over two per cent on both major benchmarks, as Covid-19 cases rise across major economies such as US, China, France and the UK.

According to sources, Brent Crude has dropped 2.2 per cent to US$77.78 per barrel, while West Texas Intermediate (WTI) Crude has declined even further by 2.31 per cent to $75.21.

The spread of the highly transmissible Omicron variant has reached record highs, increasing the number of Covid cases across the globe.

While scientists have suggested that the latest variant is milder compared to the Delta variant, the sheer number of cases has resulted in major economies across Europe such as Germany and France revisiting the era of restrictions as seen in 2020.

Coupled with these restrictions are renewed fears of reduced demand and a supply glut, with concerns over possible restrictions further reducing air travel demand and consumption.

According to a Reuters poll published on New Year’s Eve, oil analysts have consequently lowered their price forecasts for 2022.

A survey of 35 economists and analysts forecast Brent crude would average $73.57 a barrel in 2022, about two per cent lower than $75.33 consensus in November 2021. It is the first reduction in the 2022 price forecast since the August poll.

Oil Price Made Gains only Two Days Ago

Overall, both benchmarks recently posted their biggest annual gains since 2016, with Brent Crude ending the year up 50.5 per cent while WTI posted a 55.5 per cent increase, spurred by the global economic recovery from the COVID-19 pandemic slump and producer restraint.

“This year was a story of global recovery for petroleum products,” said John Kilduff, a partner at Again Capital Management in New York.

“The oil market continues to be highly reactive to developments on the pandemic front – we’re not out of the woods yet, but we are close to pre-pandemic demand levels.”
John Kilduff, Again Capital Management

However, the oil market has endured a wild journey in recent months following a sustained period of low prices amid multiple lockdowns across the world.

Prices rallied earlier in 2021 to three-year-highs of $86.70 per barrel on the Brent Crude benchmark, and to seven-year-highs of $85.41 on WTI Crude.

The benchmarks then reported price drops of 13 per cent to below $70 per barrel after the emergence of the Omicron variant increased fears in the market of a return to lockdowns across key economies.

Prices have since recovered somewhat, with worries over the latest strain of Covid-19 beginning to ease following reports it is less severe than previous variants.

This notwithstanding, with infections reaching record highs worldwide there is renewed concern over the new variant’s effect on consumer behaviour and the wider market.

Reuters has said the Organization of the Petroleum Exporting Countries and its allies such as Russia (OPEC +) may stick to the current plan to add 400,000 barrels per day of supply in February 2022 when it meets later this week on January 4, 2022.