Oil fell with equities and other risk assets as the COVID-19 omicron variant’s rapid spread revived concern about more government restrictions and the potential hit to fuel demand.  

Futures in New York closed down 2 per cent on Thursday, with the S&P 500 also declining. Lockdowns and other measures aimed at containing the new strain are increasingly casting a shadow over the outlook for consumption, and recent data show omicron is 4.2 times more transmissible than the delta variant. 

“The market is still in calibration mode around the virus,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. Though traders initially priced in the worst-case scenario for omicron, they later “underestimated” how governments would respond to the contagiousness of the variant, she said. 

Concerns about demand from Asia were also weighing on the market. Buyers in the region aren’t seeking extra supplies from Saudi Arabia after the kingdom hiked prices despite weakening physical demand.

Oil had rebounded after falling for six weeks, in part due to major consumers signaling they would release strategic crude reserves to tame energy prices and the emergence of omicron. While Pfizer Inc. and BioNTech SE show a third dose of their vaccine can neutralize the variant, some nations have implemented restrictions on air travel and U.K. Prime Minister Boris Johnson has tightened pandemic rules.

“Yesterday’s news about the effectiveness of a vaccine following a third jab certainly sounded promising,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Nonetheless, omicron is causing renewed restrictions on public life to be imposed in additional countries.”


  • West Texas Intermediate for January delivery fell US$1.42 to settle at US$70.94 a barrel in New York
  • Brent for February settlement dropped US$1.40 to settle at US$74.42 a barrel.

In the U.S., hospital admissions with confirmed COVID-19 are rising in parts of the Northeast and Mid-Atlantic. South Korea saw a record number of new infections this week, despite being one of the most vaccinated places in Asia with 80 per cent of the population fully inoculated. Data showed 857 people were seriously ill Thursday, also a fresh high. 

China’s factory inflation, meanwhile, moderated in November from a 26-year high, with the slowdown providing more room for policymakers to support the economy. The easing is a sign that efforts to tame soaring commodity prices and deal with power shortages over the past few months are having an effect.

U.S. government data on Wednesday revealed a build in inventories of crude oil at the Cushing hub in Oklahoma for a fourth straight week, as well as increases in stockpiles of gasoline and distillate. 

Other oil-market news:

  • Traders and investors are getting out of Europe’s main diesel contract at the fastest pace in years.
  • Canada’s oil production could continue to rise for the next decade and then begin declining as countries strive to reduce carbon emissions, the Canada Energy Regulator said Thursday.
  • Brent and WTI continue to find support at their respective short-term and 200-day moving averages, while facing resistance at the 100-day markers.