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Oil Price Fundamental Daily Forecast – Rally Stalls on Lack of Clarity Over Impact of Omicron on Fuel Demand

By:
James Hyerczyk
Updated: Dec 9, 2021, 05:27 UTC

Britain’s plan to implement tougher COVID-19 measures in a bid to slow the spread of the Omicron variant of the coronavirus is a potential negative.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower in a choppy trade on Wednesday as investors digested new developments concerning the Omicron coronavirus variant.

Meanwhile, traders are awaiting weekly inventories data from the government later this morning. The markets are also trading inside yesterday’s range, which tends to suggest investor indecision and impending volatility.

At 14:36 GMT, January WTI crude oil futures are trading $71.65, down $0.40 or -0.56%. February Brent crude oil is at $75.18, down $0.26 or -0.34%. The United States Oil Fund (USO) ETF is trading $51.85, up $0.26 or +0.50%.

Traders Showing Mixed Reaction to Fresh Omicron Developments

WTI and Brent crude oil are trading lower despite what appears to be positive comments about the effectiveness of vaccines against the omicron variant.

Three doses of Pfizer and BioNTech’s vaccine provide a high level of protection against the omicron variant of the virus that causes COVID-19, the companies announced Wednesday, Reuters reported.

A booster shot of the vaccine increases antibody protection 25-fold compared with the initial two-dose series, according to a preliminary lab study. A third shot shows virus-fighting abilities comparable with the 95% protection provided by two doses against the original strain of the virus.

Britain Could Implement COVID-19 ‘Plan B’ as Early as Thursday – Reports

While news boasting the effectiveness of the vaccines is being seen as a positive development, Britain’s plan to implement tougher COVID-19 measures in a bid to slow the spread of the Omicron variant of the coronavirus, is a potential negative.

According to reports, the British government is expected to announce as soon as Wednesday the new Plan B which could include advice to work from home and COVID passports for large venues. This could have a negative effect on crude oil demand.

EIA on Tap after API Reports Mixed Results

The American Petroleum Institute (API) estimated an inventory draw of 3.089 million barrels. Analyst expectations for the week ending December 3 were for a build of 2.093-million barrels.

The API reported a build in gasoline inventories of 3.705 million barrels for the week ending December 3. Distillate stocks also saw an increase in inventory of 1.228 million barrels for the week.

At 15:30 GMT, the Energy Information Administration (EIA) is expected to report a 1.5 million barrel draw.

Short-Term Outlook

The price action suggests we could be looking at a range bound trade until there is some clarity over the impact of the Omicron coronavirus variant on global demand. Technically, the chart pattern suggests we could see a bout of heightened volatility.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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