Yahoo Finanza Oil Price Fundamental Daily Forecast – Potential Demand Destruction Puts Pressure on OPEC+ to Curb Output
Fear of demand destruction is driving U.S. West Texas Intermediate and international-benchmark Brent crude oil futures sharply lower on Tuesday after Moderna’s CEO warned COVID-19 vaccines were likely to be less effective against the Omicron variant.
After a slight recovery on Monday, the risk-off sentiment is re-gaining momentum, as investors and hedge fund managers are still evaluating the potential risk of the Omicron coronavirus variant.
Fueling this belief are comments from the head of drugmaker Moderna Stephane Bancel who told the Financial Times that he expects existing vaccines to be less-effective against the new variant. The CEO told the paper there could be a “material drop” in the current vaccines’ effectiveness against the variant. Bancel told CNBC on Monday that it could take months to develop and ship an omicron-specific vaccine.
The CEO’s remarks spooked financial and commodities markets, adding to existing worries about oil demand.
At 15:32 GMT, January WTI crude oil futures are trading $67.98, down $1.97 or -2.82% and February Brent crude oil is at $70.91, down $2.31 or -3.15%.
OPEC Oil Output Rises by 220,000 Bpd in November – Survey
The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found on Tuesday, bringing a lack of capacity in some producers into focus ahead of a policy meeting this week, Reuters reported.
The Organization of the Petroleum Exporting Countries (OPEC) pumped 27.74 million barrels per day (bpd) in November, the survey found, a rise of 220,000 bpd from the previous month but below the 254,000 increase allowed under the supply deal.
OPEC and its allies, a group known as OPEC+, are gradually relaxing 2020’s output cuts as demand recovers from the pandemic. But many smaller producers can’t raise supply and others have been wary of pumping too much in case of renewed COVID-19 setbacks, Reuters said.
Daily Forecast
Worries about the Omicron coronavirus variant are taking center stage on Tuesday, but there is a U.S. supply report at 21:30 GMT. The American Petroleum Institute (API) will release a report which is expected to show weekly crude inventory rose about 1.0 million barrels.
Looking ahead, OPEC+ meets on Thursday. A U.S.-led release of oil stocks by consumer nations to lower prices and the appearance of the Omicron coronavirus variant have cast doubt whether a 400,000 bpd output boost planned in January will go ahead.
The pressure is on OPEC+ to drop its plan to raise daily output by 400,000 bpd in December and January. The uncertainty surrounding Omicron and its possible demand destruction makes raising production a difficult thing to do at this time.
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This article was originally posted on FX Empire
