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Oil down on Omicron restrictions and China fears

Oil down on Omicron restrictions and China fears
© Reuters. FILE PHOTO: Oil storage containers are seen, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021. REUTERS/Lucy Nicholson/File Photo

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices fell on Thursday after measures by some governments to slow the spread of the Omicron coronavirus variant and a ratings downgrade for two Chinese property developers that stoked fears over the economic health of the world’s biggest oil importer.

Brent crude futures fell $1, or 1.3%, to $74.82 a barrel by 1310 GMT after touching a peak of $76.70. U.S. West Texas Intermediate (WTI) crude futures fell 92 cents, or 1.3%, to $71.44 after a session high of $73.34.

“Although laboratory tests showed that the Pfizer (NYSE:PFE) vaccine has a neutralising effect on Omicron … new measures are being introduced to try to stop the spread of the virus,” said Tamas Varga of oil brokerage PVM.

British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England on Wednesday, saying people should work from home where possible and wear masks in public places and show COVID-19 vaccine passes for entry to certain events and venues.

Denmark also plans new restrictions, including closure of restaurants, bars and schools, while China has halted group tourist trips from Guangdong.

South Korea has registered record infections while cases remain elevated in Singapore and Australia.

Ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group on Thursday to “restricted default” status, saying they had defaulted on offshore bonds, while a source said that Kaisa had started work on restructuring its $12 billion offshore debt.

“The … news … exacerbates the Chinese GDP growth fears and ultimately could impact the oil-buying appetite of the world’s biggest crude customer,” said Rystad Energy analyst Louise Dickson.

Markets were buoyed by comments from BioNTech and Pfizer that a three-shot course of their COVID-19 vaccine could protect against infection from the Omicron variant.

The Omicron outbreak sparked a 16% slump in Brent prices from Nov. 25 to Dec. 1. More than half of the drop has been recouped this week, but analysts say a further recovery could be limited until Omicron’s impact is clearer.

U.S. inventory data released on Wednesday also weighed on prices.

Energy Information Administration (EIA) data showed that crude inventories were down by 240,000 barrels last week, much less than analysts in a Reuters poll had expected, with stocks at the Cushing delivery hub in Oklahoma rising by 2.4 million barrels. [EIA/S]

Fuel stocks also rose by a combined 6.6 million barrels, the data showed.

Source: Investing.com

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