Oil Dips as Markets Price in Consumption Slowdown
Oil prices fell as the markets price in lower consumption into 2022, with Friday’s sell-off continuing in Asia Monday morning, OANDA analyst Jeffrey Halley said in a Monday note. Major oil consumers are cutting back on demand amidst the energy crisis and omicron wave.
Worries over the omicron variant are intensifying, especially in Europe and the UK, which could be implementing tighter restrictions soon, Halley noted.
In addition, US growth may take a small haircut in 2022 as US Senator Joe Manchin III has said he will not be supporting the Build Back Better bill, the analyst said.
Brent crude dropped 2.20% on Friday and fell another 2.65% in Asia on Monday to $71.00 per barrel.
The West Texas Intermediate crude declined 2.25% on Friday and tumbled another 3.65% to $68.10/b in Asia on Monday, Halley said. Both contracts closed below their 200-day moving averages on Friday, according to the note.
The short-term outlook for oil may be suffering from a negative sentiment from omicron and the legislative situation in the US but Halley said the Organization of Petroleum Exporting Countries and its allies, or OPEC+, should not be discounted from the situation.
If Brent continues to sink, OPEC+ could step in to roll back their output hikes, Halley said.
European Energy Prices Soar on Forecasts of Colder than Normal Temperatures.
Energy prices surged in Europe on forecasts of freezing temperatures this week, heightening concerns over energy shortages, Bloomberg News reported Monday.
Temperatures are expected to fall below zero degrees Celsius in several European capitals, boosting demand and straining electricity grids, the report said.
The forecasts come amid supply issues from low wind speeds and severe nuclear outages in France, along with Russia’s plan to keep natural gas flows through Germany limited on Monday after capping supplies over the weekend, according to Bloomberg.
Below-normal temperatures are expected to remain in the UK, Denmark and northern Germany next week, the report said. #Oil Dips as Markets Price in Consumption Slowdown
