Oil Price Fundamental Daily Forecast – Selling Pressure Eases as Omicron Assessment Begins
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher on Monday. The main objective for traders is to recover from Friday’s exaggerated plunge and to put prices back into an area that better reflects the market’s value.
Monday’s more than 6% rebound in crude oil reflects trader concerns that Friday’s plunge in oil and financial markets on concern about the Omicron coronavirus variant was overcooked. Most blamed thin post-holiday volume for the debacle. They felt the market would make a dramatic price adjustment once the major players returned to work on Monday. That’s what we’re seeing in the early go in today’s session.
OPEC+ Faces New Challenges as Investors Await More Details of the Variant
Omicron has created a new challenge for OPEC+, which meets on December 2 to discuss whether to proceed with a scheduled oil-output hike for January. OPEC+ has postponed technical meetings this week to gain time to assess its impact.
Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud said on Monday he was not worried about Omicron, Asharq Business reported, while his Russian counterpart said he sees no need for urgent action on the market, Reuters reported.
The fear factor and thin volume that helped fuel Friday’s price slump is being offset on Monday by bargain-hunters who recognize value at these price levels and the return of the major players who often act as “stoppers” when the selling gets out of control.
Despite today’s relative calm, heightened volatility is going to be the theme over the near-term with traders now scrutinizing scientists’ assessment of the efficacy of vaccines against the new variant and trying to assess how potential measures to contain its spread could affect economies and policy.
Most traders now believe it may take as much as two weeks to get more clarity about the variant. In the meantime, so are already pricing in the possibility of a few light lockdowns and minor restrictions.
Any large scale lockdown and restrictions would likely cause OPEC+ to downwardly revise its demand figures which could mean the lowering of its output pledge.
Given the current situation and the number of unknowns, it may be fitting for OPEC+ to just skip this meeting and leave production levels as they are.